Contrary to the bright outlook projected by analysts for 2014, the market ended the Q3 of 2014 on negative note, on the back of reduced foreign participation and weakened demand by domestic investors due to developments in the financial, political and global environments negative to growth of the market.
The impact of the hike in the cash reserve ratio (CRR) on public sector funds and the increase in capital requirement of Bureau de Change (BDC) operators from N10m to N35m and the increase in their mandatory caution fee from USD10,000 to N35m, The Street Journal gathered, impacted liquidity squeeze on the economy and affected the performance of the market negatively.
The market also suffered from the increase in political risk as indicated by the various security challenges facing the country. The insecurity in Nigeria, especially the boko haram insurgency in the northern part of the country is impacting on the market negatively as both Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI) into the country dwindles.
Nigeria’s fiscal situation has equally not inspired confidence in investors, which is highlighted by Standard & Poor’s revision of the country’s credit outlook to ‘negative’ from ‘stable’.
Investors are already wary of the challenges that come during an election year and some are holding back from investing, possibly due to uncertainty surrounding government policy post-election.
The stoppage of the quantitative easing by the US Federal Reserves has resulted in capital reversals from emerging markets due to an improvement in US economic indicators. The US is expected to completely end its five year old monthly bond buying programme (quantitative easing) by end of October 2014. The improvement in US economy, the low yield across most developed market and the increasing risk of most emerging markets are making the US market more attractive to funds; leading to further capital outflows from emerging markets.
The influence of the above factors on the market were so strong that the expected price rally from above average half year unaudited result, high earning / divided yield and good dividend payment of some quoted stocks could not help the market.
However, Sell Pressure intensified today as market closed with 0.32% loss.
Trading activities on the Nigerian stock exchange decreased by 65.23% as investors bought 242.96 million shares worth N2.68 billion, in 5,169.00 deals, compared to 698.84 million shares worth N6.07 billion, in 4,833.00 deals exchanged on Thursday. Ikeja Hotel Plc, Sterling Bank Plc and Transcorp Plc were the most actively traded stocks on the exchange today in terms of volume, while Zenith Bank Plc and Oando Plc, topped in terms of value.
The Street Journal reports that The Nigerian Stock Exchanges-All Share Index depreciated by 0.32% (-127.86) to close at 40,444.39 from 40,572.25 attained on Thursday. Market capitalisation also decreased to N13.35 trillion from N13.40 trillion the previous trading day. The BGL 50 Index also followed suit with a 0.39% loss to close at 174.21 from 174.90, while the market capitalisation stood at N12.56 trillion from N12.61 trillion recorded on Thursday.
A total number of 15 stocks gained on the bourse today while 30 stocks declined leaving 67 stocks unchanged. Ikeja Hotel Plc emerged the toast of investors as it appreciated by 9.92% to close at N2.66 kobo, followed by Champion Breweries Plc with a 4.94% gain to close at N15.73. Others on the gainers chart include Africa Prudential Registrars Plc, Fidson Healthcare Plc and Fidelity Bank Plc. On the flip side A.G. Leventis Nigeria Plc. topped the losers chart with 9.52% decline to close at N1.33 followed by UBA Capital Plc which declined by 4.61% to close at N14.50 kobo. Others on the losers table include; Transcorp Plc, International Energy Insurance Company Plc and Honeywell Flour Mill Plc.
Topping the chart amongst the BGL 50 stocks was Fidelity Bank Plc which appreciated by 1.99% to close at N2.05 kobo, followed by Forte Oil Plc with a 1.36% gain to close at N220.50. Others on the gainers chart include Flour Mills Nigeria Plc, Dangote Cement Plc and Guinness Nigeria Plc. On the flip side UPDC Plc topped the losers chart with 4.61% decline to close at N14.50 followed by Transcorp Plc which declined by 3.68% to close at N5.49 kobo. Others on the losers table include; Honeywell Flour Mills Plc, International Breweries Plc and Zenith Bank Plc.