The Monthly NCM Report for Nov 2011

Transcription

1 ISSN Vol. 1 No. 84 The Nigerian Capital Market Report The Monthly NCM Report for Nov 2011 The Monthly NCM Report for Nov Page 1 Issued on December 06, 2011

2 Contents Executive Summary 3 Introduction 6 All-Share Index Movement 10 Market Dynamics 11 Comparison of 2011 and 2010 Market Performance 12 Sectoral Index Movements 14 NSE -30 Index, NSE -Food Index, NSE -Banking Index, NSE -Insurance Index & NSE -Oil Index Transactions Volume and Value Trend 21 Top Ten Trades for November 2011 v. November Top Ten Traded Sectors for November 2011 v. November Top Ten Gainers as at November 2011 v. November Top Ten Losers/Decliners as at November 2011 v. November Analyst Opinion 27 The Monthly NCM Report for Nov Page 2 ISSN Vol. 1 No. 84

3 The Monthly NCM Report for Nov 2011 ISSN Vol. 1 No. 84 Executive Summary The bears returned to the bourse in the month of November 2011 to erase the gains recorded in the previous month as pessimistic trading dominated market atmosphere throughout the period under review. Nigerian stocks shed above 800 basis points in the month, amounting to N billion loss against the N130.07billion gain experienced in the previous month. This showcased the wary posture of the investors towards the investment in equities in the month in the face of low valuation and prices of the equities which could be partly traced to lack of positive news to abate the negative sentiments while the sustained attractive rates in the risk-free investments continued to lure funds out of the market unabatedly. The outlook recorded in the month is not too far from our expectation as we had envisaged an increased volatility in the outstanding months despite the impressive gains recorded in the previous month. The festive period and end of the year syndrome would continue to have depressing impact on the market as sell mandates are expected to increase considerably, just as we have seen in the month under review. A cursory look at the trend revealed the dominance of the bears in the early stage of the month as the market could not sustain the five days bargain momentum observed towards end of the previous month. As a result, market net worth depleted by N200.97billion in first 10days (November 1 st to November 16 th 2011) of the month while ASI experienced -2.23% dip as year to date market performance stood at %. During this period, the food & beverages stocks were the worst hit as NSE sectoral indices revealed -9.63% loss while Oil & Gas stocks were the best performing with 2.20% gain as revealed by sectoral indices. In the same vein, bearish sentiments still dominated market atmosphere with growing investors apathy in the last 10days of the month as buttressed by % decline in market turnover when compared with early stage posture. An average of million volume turnover recorded against average turnover of million units traded in the first 10days of the month. During these sessions, banking stocks were the major hits with -5.17% loss due to the increased volatility witnessed in the sub-sector, followed by insurance with -3.95% loss while Oil & Gas sub-sector sustained the leading performance experienced in the early stage of the month to record modest gain of +.53%. Market however, dipped by -1.75% between the period of 17 th and 30 th November 2011 while the month closed with aggregate loss of -4.00% to erase the 1.72% gain recorded The Monthly NCM Report for Nov Page 3

4 in the previous. The outlook also revealed worse market performance when compared with -1.34% loss recorded in the previous year comparable period. An extended analysis revealed a low turnover in the month, buttressing the wary posture and low appetite of the investors as market turnover closed lower by % when juxtaposed with previous year posture. More so, at end of the month, the year to date performance remained unimpressive at %, a true reflection of sustained weak market fundamentals as observed in the early stage of the year. The month appeared worst performing so far in the quarter. The looming dark cloud in the other markets across the globe could impact the trend as fear of second global recession triggered huge migration of funds to save haven in the month unabatedly. On the other hand, the efforts on the part of the management of NSE to put market back on recovery path is commendable, though we want to resound that improved market fundamentals would be a key driver. In addition, the concerted bid by the stakeholders to encourage the telecomm firms and other multi-nationals to list on the Nigerian bourse is a welcome idea- a right step into right direction. In our opinion, this will not only grow the market capitalisation and net worth considerably but it will help revitalise the primary market and in a way renew market confidence as well, all things being equal. We believe series of listings and regulatory incentives would be the major catalyst in driving this to save harbour. On the final note, the merger and acquisition in the market, Oceanic Bank limited and Ecobank Plc combined business, living Ecobank the surviving entity. More so, ETI, the parent body of Ecobank Plc, increased its stake in Ecobank Plc. As a result, this technically affects the listing status of the Ecobank Plc as the bank fell short of the required floats in the market- this might result to delisting of the entity (Ecobank Nigeria Plc) from Nigerian bourse. A number of developments we believed should have impact in the month as predicted in the past monthly reports. Some of which are: Factors expected to impact Market Improved bargain posture as uncertainty waned in banking sector Outcomes Bargain appetite dropped as low turnover was observed due to wary attitude of investors Enhanced state security outlook Liquidity challenges Renewed institutional buying Developments towards demutualization. There was a considerable slide in the state security posture as we bombings resume market still experienced liquidity challenges Low institutional buying was observed. Development is on course with progress as committees have constituted towards achieving this. The Monthly NCM Report for Nov Page 4

5 Balanced monetary policies The unbalanced monetary policy still at the detriment of the market as funds are on the outflow Proshare Research Developments in the coming months: Continued sell mandates due to festive period Closing of books by institutional investors Positive response to concluded agreement to grant debt leniency to brokers and dealers as announced by finance minister. Reactions to stakeholders bid to require listings of telecom and multinationals firms Dematerialization of shares Inflation and Monetary Policy rates Liquidity challenges Improved regulatory oversight Thank you for reading and do take time to share with us your thoughts on the market, analyst at We value your feedback and comments. The Monthly NCM Report for Nov Page 5

6 Introduction Low confidence drives Nigerian stocks southward, ASI dips -4.00% The Nigerian stocks erased the impressive gains recorded in the previous month while unrelenting pessimistic trading extinguished the optimistic buying tendency observed at the tail end of month of October The straight four months unprofitable trend witnessed in the year extends the depressing trend after a month break as the bears resumed with sell pressure on the back of increased pessimism towards equities while lack of positive news in the market continued to contract market breadth amid low market turnover. Consequently, stocks shed N billion for the month of November- a worse performance when compared with N billion loss recorded in the previous year comparable period. An extended analysis revealed over-bearing effect of the weak market fundamentals in the month as investors remained pessimistic with wait and watch attitude towards investment in equities despite the successful recapitalisation in the bank sector and low valuation of the stocks across the board. The unimpressive low market turnover buttressed our position. Though, unbalanced posture of monetary policies contributed to this as reallocation of funds to save haven gained more tempo. Unimpressive Market Turnover Metrics Nov 11 Vs Nov 10 Nov 11 Vs Oct 11 Volume % % Value % % Proshare Volume and value traded moved southward by % (YoY) % (YoY) respectively. Also, a decline of % (MoM) and % (MoM) was observed in the volume and value traded respectively. The All Share Index succumbed to the sell pressure in the month as volatility increased to close at 20,003.36, dipping by -4.00% for the month while the bears depressed the market breadth considerably to put YTD % Market pattern basically reveals that market is technically bearish in long term as NSE ASI moving averages trend with index of 20, as at November 31 st, 2011 trading below its 20 days, 50 days and 200 days moving averages of 20,323.61, 20, and 23, respectively. The Market Game On The market in this month recorded a total volume of 5.12 billion units valued at N40.69 billion (US$ million) exchanged in 70,519 deals compared with 7.43bn units valued at N60.33bn (US$337.12million) exchanged in 77,501 deals in November The Monthly NCM Report for Nov Page 6

7 2010. Comparing, the volume and value traded in the month reveals a low market turnover by % volume growth and % value dip against the previous year s comparable period respectively. During the month, All-Share index recorded a negative trend of -4.00%, a weaker performance to -1.34% loss recorded in November However, the trend appeared worse when compared with the -3.02% recorded in the preceding year s comparable period closed at 21, Market capitalisation this month depreciated by N317.27billion (US$1.98 billion) as against depreciation by N104.51billion (US$653.22million) recorded in November Market capitalisation recorded similar figures of N113.03billion (US$706.48million) in the preceding year s comparable period. The Monthly NCM Report for Nov Page 7

8 The Market Game Changers: Despite the low valuation and penny position of the equities on the bourse and the successful recapitalisation and merger & acquisition in the banking sector, the market still traded northwards- low appetite, a function of sustained weak market fundamentals and unbalanced monetary policies that fuelled reallocation of funds considerably. Other contributory factors remained absence of positive news, attractive rates in the alternative markets, pressure of festive period, low liquidity and weak bargain power displayed by brokers and dealers. As we believed that the full impact of recapitalisation and merger & acquisition in the banking sector will take effect in the first quarter 2012 when the banks will resume full fresh operation, we cautiously envisage that the market might experience continued volatility and turbulences due to the end of the year pressure from both institutional and individual investors towards balancing of accounts and meeting the festive demands respectively. The Monthly NCM Report for Nov Page 8

9 Also, the pressure of liquidity squeeze in the economy will have rub-off effect on investors purchasing power while weak market fundamentals and the unfriendly monetary rates which had made money market and other alternative investment instruments more attractive would also continue to have negative impact. Nevertheless, we remained optimistic as low valuation of equities and expectation of improved Q4 earnings report with rewards are likely to encourage investments initiatives and speculative buying as smart and value investors are expected to take strategic positions considerably. The contributory factors for the month of November 2011 performance can be located in the following indices as outlined below: Negative Factors in the market Pessimistic trading still a concern Hike in monetary rates Unfavourable inflationary outlook Liquidity sequence Low institutional activities Attractive rates in money market and other alternative investment vehicles Fear of second round of global economic recession Relocation of funds due to hike in monetary instruments No lending to the private sector Banks are yet to commence active lending Investor s confidence is still fragile Absence of Margin loans Influx of Federal government and state bonds with other fixed income instrument in market. High lending rates. End of the year pressure Low commitment Insecurity in the states Positive Factors in the market Concluded agreements to grant debt leniency to brokers and dealers Low valuation and penny posture on equity prices Collective bid to list telecoms and other multi-nationals on the bourse Impressive initiatives towards reviving market and investors confidence. Market Concerns: persistent Low commitment as speculative and cautious trading dominated while this will continue to reign in the market on the back of lingering market confidence and weak market fundamentals in the face of attractive rates in the money market. More so, liquidity is still an issue as most local investors lack bargain initiatives as banks lending rates remained unfriendly due to erratic increase of MPR. The Monthly NCM Report for Nov Page 9

10 The NSE All-Share Index Movement The month of November started with reversal posture as pessimism took over the market atmosphere, following the straight five days rally that ended the previous month. The All Share Index lost ground to sell pressure most of the time in the month on the back of continued weak bargain posture paraded in the month, buttressed by low market turnover observed above. The dominance of the bears had over-bearing effect on the market outlook as market breadth stayed in the negative zone throughout the month. Most of the bargain initiatives observed in the month were outweighed by the growing sell tendency due to wary posture and sustained investors apathy despite the low equity prices across the board. Extended analysis revealed the strong grip of the bears as downtrend in the market measures 70% of the traded periods in the month while the uptrend recorded stakes 30%.- This shows the bears significantly dominated the month buttressed by the moving averages. Trends showed that activities were dominated by the bears in the early stage of the month as the key benchmark indices succumbed to bear pressure to remain weak at 20, basis points, recording -2.23% loss in the first 10days into the month. More so, similar trend was observed in the last 10days of the month as the growing sell tendency continued to depress market further, recording -1.75% loss to close with % aggregate loss for the month against -1.34% loss recorded in the previous year comparable period. At the end of the last trading day of the month, All-Share Index closed below the figure recorded at the close of 4th January 2011 by %. This shows how much the market has lost in the year. Market pattern basically reveals that market is technically bearish in short term as could be seen from the NSE ASI moving averages trend with index of 20, as at November 30 th, 2011 trading below its 20 days, 50 days and 200 days moving averages of 20,323.61, 20, and 23, respectively. This suggests market trend is technically bearish. The Monthly NCM Report for Nov Page 10

11 At the close of the last trading day of the month, All-Share Index traded below its 20 days, 50 days and 200 days moving averages of 20,323.61, 20, and 23, respectively. This suggests market trend is technically bearish. NOVEMBER 2011 MARKET DYNAMICS The market dynamics as graphically illustrated below showed the appreciation and depreciations on the daily basis. Pessimism, investors apathy, low bargain posture, weak market fundamentals, liquidity squeeze, speculative tendency, low commitments and sustained attractive rates in the The Monthly NCM Report for Nov Page 11

12 other alternative markets due to unbalanced monetary rates were responsible for the dynamics recorded. MARKET DYNAMICS IN THE PRECEDING YEAR COMPARABLE PERIOD (NOVEMBER, 2011) COMPARISON OF 2010 AND 2011 MARKET PERFORMANCE The market performance in November 2011, when compared with the 2010 comparable period; showed a decline. In the period under review, ASI recorded -4.00% The Monthly NCM Report for Nov Page 12

13 depreciation compared with -1.34% depreciation recorded in November The scenario revealed that the performance in the current year s comparable period was far below the previous year trend but the market closed at approximately in the range of 20,000. Dates Jan Nov NSE ASI 20, , Market Capitalisation(trillion) Market Capitalisation($ billions) Nov , Yearly Return 18.84% 58.52% 58.52% Monthly Return -1.34% -1.25% -1.25% Jan , Nov , Nov , Yearly Return % % % Monthly Return -4.00% -4.84% -4.84% The Monthly NCM Report for Nov Page 13

14 From the table above, the year to date performance as at 30 th November, 2011 closing at % against the previous year comparable period as at 30 th November, 2010 with % appreciation, indicating a significant decline over the trend recorded last year. SECTORAL INDEX MOVEMENTS Dates NSE-30 % Change NSE- Food % Change NSE- Banking % Change NSE- Insurance % Change NSE- Oil & Gas % Change 01-Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov The Monthly NCM Report for Nov Page 14

15 In the month under review, four sectoral indices sustained the bearish posture with NSE Food & Beverages leading the pack by % loss, followed by NSE Banking with %, NSE Insurance -4.75% and NSE 30 recorded lowest loss by -3.97%. on the other hand, NSE Oil & Gas sector sustained the positive outlook with modest gain of 1.57%. OCTOBER AND NOVEMBER SECTORAL INDEXES COMPARED The Monthly NCM Report for Nov Page 15

16 When compared trends of sectoral indices in November 2011 with November 2010, it was revealed that NSE sectoral indices recorded better postures in previous year comparable period with three positive postures against single positive figure recorded in the current period. The Monthly NCM Report for Nov Page 16

17 NSE -30 INDEX The trend recorded in the blue chip stocks is reflected in the NSE 30 index movement. The blue chips experienced unrelenting selling activities in the early period under review as the initial pessimistic trading in the market had much impact on the outlook recorded in the sector. However, there were slight bargains observed towards end of month due to low valuation outlook and value investing approach witnessed during the period. subsequently, the index closed depressed by -3.97% as lowest loss in the league as against modest gains experienced in the previous year comparable period. The outlook however revealed that the blue chips were among most active stocks in the period under review. The Monthly NCM Report for Nov Page 17

18 NSE -FOOD INDEX The NSE Food recorded the highest loss due to volatility witnessed in the sector and low bargain position. The sell activities dominated the sector as the moderate buying noticed was suppressed to close the sector negative. The index recorded % depreciation, a worst performance when compared with 1.10% loss recorded in the previous year comparable period. This could be traced to heavy sell and pessimistic trading witnessed the period. NSE -BANKING INDEX The Monthly NCM Report for Nov Page 18

19 NSE-Banking index experienced volatility in the early stage of the month till end-month. Most of the bargain initiatives were outweighed by sell pressure witnessed in the sector. The sector closed with second worst performance, recording -7.57% loss- a depressed posture observed when compared with -0.46% decline recorded in the previous month while the outlook remained unimpressive when juxtaposed with +2.21% recorded November We foresee a better bargain position in the coming period, though the ending of the year pressure is likely to reduce the envisaged positive trend in the sector. Nevertheless, a balanced outlook is expected as Q4 earnings report could call for strategic positioning in the sector. NSE -INSURANCE INDEX The Insurance sector experienced volatility during the period under review and consequently closed as third worse performing after the banking sector. The sector recorded -4.75% loss- this could be seen as profit taking in the sector due to impressive gains of +7.01% recorded in the previous month. The outlook revealed depressed posture when compared with -1.57% recorded in the previous year comparable period. The Monthly NCM Report for Nov Page 19

20 NSE -OIL INDEX The sector closed with best performance in the month to sustain the outlook recorded in the previous month, recoding +1.51% gain against +3.87% gain recorded in the previous month- an outstanding performance against market performance of -4.00% loss. The outlook revealed impressive position against +2.00% gain recorded in the previous year comparable period. The value investing approach witnessed in the market impacted the performance recorded. The Monthly NCM Report for Nov Page 20

21 Transactions Volume and Value Trend Market November '10' November '11' % Change Average Daily Volume of stocks Traded( in millions) % Average Daily Value of stocks Traded( in N'millions) 3, , % Average Daily Value of stocks Traded( in US $ millions) % Total Volume of stocks Traded (in millions) , % Total Value of stocks Traded (in N'millions) 60, , % Total Value of stocks Traded (in $ billion) % New Listing and Delisting November '10' November '11' Number of Equities Delisted Number of New Listings The transaction volume in month of November when compared with the preceding year comparable period closed lower by % to close at 5.12 billion units compared with 7.43 billion units traded in November This could be an indication that the investors patronage of the market in the month under review was significantly different. Also, the transaction value in the month under review closed lower by % at N40,69 billion ($ million) compared with N60.39 billion ($ million) of October The Monthly NCM Report for Nov Page 21

22 November 2011 vs Daily Volume Chart The Monthly NCM Report for Nov Page 22

23 Top Ten Trades for the November 2011 Zenith Bank Plc topped the transaction volume for the month while Banking stocks dominated the charts with seven of the stocks in the sector emerging in the top ten trades chart for the month. Company Total Deals Total Volume Total Value ZENITHBANK 5, ,801, ,595,653, UBA 4, ,615, ,528,700, GUARANTY 8, ,752, ,817,635, FIRSTBANK 9, ,307, ,483,330, INTBREW ,459, ,904,599, ACCESS 2, ,293, ,339,435, GNI ,849, ,924, The Monthly NCM Report for Nov Page 23

24 WEMABANK ,009, ,824, SKYEBANK 1, ,573, ,164, PREMBREW ,790, ,915, Recall Top Ten Trades for the November 2010 Company Total Trades Total Volume Total Value OCEANIC 4, ,586, ,615,558, UBA 4, ,984, ,705,360, ZENITHBANK 7, ,255, ,819,983, FIRSTINLND 2, ,410, ,731, GUARANTY 8, ,207, ,377,968, FIRSTBANK 13, ,882, ,199,601, ACCESS 3, ,286, ,502,785, PLATINUM 2, ,665, ,959, UBN 2, ,716, ,103,064, FIDELITYBK 2, ,499, ,670, Top Ten Traded Sectors for the month Sector Sum of Trades Sum of Volume Sum of Value Financial Services 40, ,866,297, ,281,990, Consumer Goods 13, ,101, ,953,898, Services 3, ,207, ,240, Oil & Gas 6, ,017, ,056,404, Industrial Goods 4, ,852, ,180,314, ICT ,548, ,208, Agriculture ,902, ,677, Natural Resources ,097, ,950, Conglomerates 1, ,654, ,181, Healthcare ,894, ,585, Construction/Real Estate ,066, ,233, Financial Services ,298, ,149, Grand Total 70, ,121,555, ,696,997, Top Ten Gainers in the month of November COMPANY 04-Jan Nov Nov- 11 Change %Change OKOMUOIL % NCR % The Monthly NCM Report for Nov Page 24

25 IKEJAHOTEL % ROADS % LAWUNION % GOLDINSURE % GTASSURE % ETRANZACT % FCMB % PREMBREW % Top Ten Year to Date Appreciation COMPANY 04-Jan Nov Nov- 11 Change %Change ROADS % CAPHOTEL % CHAMPION % OKOMUOIL % IKEJAHOTEL % NCR % UNTL % 7UP % NEIMETH % NB % Top Ten Decliners in the Month COMPANY 04-Jan Nov Nov- 11 Change %Change RTBRISCOE % ETERNAOIL % NEIMETH % FIDELITYBK % CADBURY % CUSTODYINS % MAYBAKER % EVANSMED % DANGSUGAR % PAINTCOM % The Monthly NCM Report for Nov Page 25

26 Top Ten Year to Date Depreciation COMPANY 04-Jan Nov Nov- 11 Change %Change PAINTCOM % UBA % AFRIBANK % DANGSUGAR % DNMEYER % DANGFLOUR % INTERCONT % PLATINUM % CCNN % STARCOMMS % The Monthly NCM Report for Nov Page 26

27 Analyst Opinion Confidence remained the most important and key factor in the capital, confidence means liquidity and liquidity will continue to dry out as long as investors confidence stays on sidelines. This further reveals that market confidence should be taken as integral part of this market as we all know that investors can kill market by just folding their harms. The continued bearish trend in the market could not be isolated from above assertion; it stands as bye product of dearth of market confidence. The sustained low market turnover pointed this again. Market dipped by -4.00% despite low price and valuation across the board while the announcement of concluded agreement on debt leniency to brokers and dealers by finance minister had no effect on the market activities. This revealed wary posture of the investors towards investment in equities. We are of the opinion that lack of the positive news and attractive rates in the alternative markets contributed to the impact observed as reallocation of funds gained more dominance. The market fundamentals are still weak, this means the volatility is likely to continue if the market confidence remained on sidelines. The tendency is so high, considering the growing economic uncertainties on the global scenes in relation to the stake controlled by the foreign investors in our market. This is more than enough signal to tell us that we need more than meetings and dialogue to revive the market confidence. Market turnover and activities will remain low as long as proprietary trading segment of the market is fading out. We believe that the debt leniency to brokers is a good starting point and a good start in the right direction while improved transparency in the market and reactivation of well structured margin loans will be a consolidated approach to this. However, we foresee an increased volatility due to the end of the year pressure as more institutional investors are expected to close books for the year while the pressure to meet the festive demands will increase the sell mandates and the volatility in the market. Nevertheless, we expect a balanced outlook as ease of tension and uncertainty on the bourse coupled with low valuation of blue chip stocks across the board are likely to cushion volatility impact while strategic buying and speculative trading in anticipation of financial year end reward will also come to play against the volatility. To this regard, we remained optimistic and bullish while we advise value investing approach as we envisage high speculative tendency with bull traps in the coming periods. The Monthly NCM Report for Nov Page 27

28 The Monthly NCM Report for Nov Page 28 Plot 590b, Pat Ojebuoboh Close, Omole Phase II, Isheri LGA, P.O.Box 18782, Ikeja, Lagos, NG DL: info@proshareng.com