Capital market recorded N631bn loss in August

SEPTEMBER 2, 2013 

Director-General, Securities and Exchange Commission, Ms. Arunma Oteh

Following an impressive showing in the first half of the year, the performance of equities in the capital market lately has been less cheerful, UDEME EKWERE writes

The equities market of the Nigerian Stock Exchange was on a steady decline in the month of August, culminating in the loss of N631bn within the period.

The steady descent in the market, which began towards the end of July, spilled into August, with the market capitalisation of the listed equities falling to N11.496tn on Friday, the last trading day in the month.

This represents a loss of 5.2 per cent or N631tn compared to the N12.127tn recorded at the beginning of the month.

The market capitalisation represents the aggregate value of all the companies or stocks quoted on the Exchange. It is obtained by multiplying the aggregate number of shares outstanding by the current price of each stock.

Similarly, the NSE All-Share Index fell by 5.3 per cent or 2,043.54 basis points to 36,248.53 points on Friday, down from 38,292.07 points recorded on August 1, 2013.

Experts, who spoke to our correspondent on Sunday, said the decline was largely as a result of external factors relating to monetary tightening measures.

Activities in the market had reached a peak in June, surpassing the pre-2008 meltdown levels with the All-Share Index hitting the 40,000 basis points level, while the market capitalisation was close to N13tn.

However, following profit-taking by investors after the release of impressive results by major companies, the market volume began a steep descent, shedding over N631bn in August alone.

The NSE-30 Index, which measures the performance of the top 30 companies on the Exchange, also recorded a significant decline in the period under review, as it fell by 6.07 per cent or 109.22 basis points from 1,798.65 points at the beginning of the month to 1,689.43 points on Friday.

An investigation by our correspondent showed that the Banking-10 Index also recorded a significant loss in the period under review, as it fell by 5.5 per cent or 22.39 basis points on Friday to close at 389.27 points, down from 411.66 points at the beginning of the month.

The Chief Executive Officer, Lambeth Trust and Investment Limited, Mr. David Adonri, said in an interview with our correspondent on Sunday that the loss recorded in August was as a result of tightening measures adopted by the regulators.

He stated that if not for the activities of the market makers, the losses might probably have been higher than what was recorded in the period.

He said, “The equities market lost significant value in August. It was driven down by external factors relating to global and domestic monetary tightening measures.

“The market makers did a lot during the month to stabilise the market, otherwise, the situation could have been worse than we witnessed.”

Adonri, however, explained that with the release of the third quarter results, activities might pick up in the market.

He said it was usual for investors to show increased interest in the market in the period just after results had been released, adding that there might be increased activities after the release of th third quarter results.

Adonri said, “The equities market may pick up briefly in October when the third quarter results start hitting the market. The outlook for the remaining period of the year is not very bright as the market traditionally slows down.

“Buying opportunities are now emerging as prices fall. Year-to-date, the equities market has performed better than last year.”

He advised the regulators not to rest on their oars, adding, “The regulators should continue their surveillance over the market with undiminished intensity.”

In their submission, analysts from Vetiva Capital Management Limited said the reduction in the equities market was largely as a result of huge sell-offs in the financial services sub-sector.

They said, “In cautious trades, the NSE was pulled downwards by the continuous selling pressure in the financial services sector. Large capitalisation stocks such as Guaranty Trust Bank Plc and FBN Holdings Plc have retreated from year-to-date high prices of N29.99 and N21.50 to N24.53 and N16.00, respectively.

“Although equities in the consumer goods sector mustered some gains on Thursday, by Friday, the sector reversed, pushing the NSE index by two per cent this week, weakening the year-to-date return to 29.10 per cent.”

For the week ahead, the analysts predicted that activities might continue on an unstable note as a result of increased selling by investors.

“We expect the Nigerian equity market sentiment to, most likely, remain weak this month and we expect a see-saw movement with thin volumes,” they predicted.