As the Central Bank of Nigeria (CBN) wielded the big stick on 12 banks for failing to meet the new Loan-to-Deposit Ratio (LDR) (previously 60.0 per cent but recently revised to 65.0 percent), the Nigerian equities market last week, suffered its worst week since April.
Last week, the effect of the measures weighed down banking stocks and consequently depressed the All-Share Index (ASI) and market capitalisation by 2.48 per cent to close the week at 26,987.45 points and N13.137 trillion respectively.
Similarly, all other indices finished lower with the exception of NSE Insurance and NSE Industrial Goods Indices, which appreciated by 5.71 per cent and 0.14 per cent respectively, while the NSE ASeM index closed flat. An analysis of last week’s transactions showed that the banking index at -3.9 per cent, recorded its largest decline since the week ended August 9, with the Consumer Goods (-4.9 per cent), and Oil and Gas indices, -2.3 per cent following suit.
Conversely, the Insurance (+5.7 per cent) and Industrial Goods (+0.1per cent) were the only indices that posted positive performances.A breakdown of activities last week showed that the Nigerian stock market closed the first trading day in the month of October on a decline of 1.14 per cent amid bearish momentum as investors sentiment remained lukewarm.
Specifically, at the end of transactions on Wednesday, the ASI decreased by 315.69 absolute points, representing a dip of 0.14 per cent to close at 27,314.87 points, while the market capitalisation lost N153 billion to close at N13.297 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks, among which were Mobil Nigeria, Total Nigeria, Nigerian Breweries, Guaranty Trust Bank and MRS Oil Nigeria.
The market continued on down trend on Thursday, as investors’ wealth declined by N112 billion on the back of sell-offs in highly capitalised stocks.The ASI decreased by 229.18 absolute points, representing a dip of 0.84 per cent to close at 27,085.69 points. Similarly, the market capitalisation lost N112 billion to close at N13.185 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks, amongst which are; Nestle Nigeria, Beta Glass, Unilever Nigeria, Guinness Nigeria and Dangote Sugar Refinery.Analysts at Codros Capital Limited said the trend witnessed so far is likely to persist through the final quarter of the year.
“Though we expect pockets of gains over the final months of the year as fund and portfolio managers realign portfolios prior to the start of 2020.“Nonetheless, we note that valuations remain attractive driven by price deterioration throughout the year. Hence, we advise that long-term investors consider appropriately timed investments.
The Chief Research Officer of Investdata Consulting, Ambrose Omodion, said the market extension of its negative sentiment for the third consecutive sessions last week through selloffs and dwindling confidence in the global economic outlook, clouded the domestic market. “This arose from the fact that liquidity flowing into the equity market remained relatively low, given that fund managers had slowed down their buying interest on news of a weak global manufacturing sector.
“The slowdown in economic activities in developed economies is a pure reflection of the impact of the lingering U.S-China trade war on confidence. Weakening confidence, as know, ultimately leads to weaker economic activities.“On the domestic environment, banks must implement the CBN directive to further increase their LDR from the 60 per cent threshold set in July to 65 per cent by December 31, 2019.
“The further increase could naturally reduce lending rates among banks, while they compete for borrowers who, as the new brides, would naturally ask for lower rates, as the banks rush to meet the set regulatory benchmark,” he said.
Further analysis of last week’s trading showed that market opened for four trading days, as the Federal Government declared October 1, 2019, a public holiday to mark the nation’s 59th independence anniversary.
A turnover of 660.654 million shares worth N9.189 billion were recorded in 12,032 deals by investors on the floor of the exchange in contrast to a total of 1.097 billion shares valued at N16.693 billion that was exchanged in 14,717 deals during the preceding week.
The financial services industry (measured by volume) led the activity chart with 458.190 million shares valued at N5.905 billion traded in 6,720 deals; thus contributing 69.35 per cent to the total equity turnover volume . The conglomerates industry followed with 55.804 million shares worth N124.513 million in 545 deals.
The third place was construction/real estate industry with a turnover of 54.330 million shares worth N62.585 million in 135 deals. Trading in the top three equities namely, Guaranty Trust Bank Plc, Access Bank Plc and FBN Holdings Plc. (measured by volume) accounted for 280.714 million shares worth N4.909 billion in 2,985 deals, contributing 42.49 per cent to the total equity turnover volume and value respectively. Also, 15 equities appreciated in price during the week, lower than 22 equities in the previous week, while 39 others depreciated in price, lower than 42 equities in the previous week.