Executive Summary 3 The Market 6 NSE ASI 8 Comparison of 2011 and 2012 Market Performance 8 Transaction 9 Sectoral Index Movements 11

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2 Contents Executive Summary 3 The Market 6 NSE ASI 8 Comparison of 2011 and 2012 Market Performance 8 Transaction 9 Sectoral Index Movements 11 NSE -30 Index, NSE -Food Index, NSE -Banking Index, NSE -Insurance Index & NSE -Oil Index NSE Sectoral Trend 13 Top Ten Trades for February Top Ten Gainers February Outlook/ Analyst Opinion 15 ISSN Vol. 1 No. 89 The Monthly NCM Report for February Page 2

3 The Monthly NCM Report for February 2012 ISSN Vol. 1 No. 89 Executive Summary Nigerian stocks in the month of February experienced more of pessimistic trading as investors appeared wary and stayed cautious towards investment in equities despite the low valuation of equities and depressed posture of blue chips in the month. The absence of positive news at large and low liquidity squeeze in the month played dominant role in the downtrend as major active traders in the month engaged in active selling with high propensity. This was reflected in the market volume turnover growth of 97.13% to close at 8.05billion- a bearish volume against 4.08billion traded in the previous month. More so, the outlook showed a significant cash outflow from the market, as against expectation of investors to take positions ahead of the 2011 full year earnings report, which could not be isolated from dull investment atmosphere observed across the global markets as euro debt continued to have over bearing impact. This was not too far from our expectation as we had envisaged in our previous NCM report that market volatility is likely to increase the uncertainty that beclouds the prospect of improved liquidity in the market might derail the possibility of impressive market performance in the year, considering the credit challenges and debt overhang around the globe which is threatening the credit line facilities banks do enjoy from their foreign counterparts In addition, the low bargain drive and continued sell activities with growing propensity despite the incoming earnings season is a true reflection of the wary posture of investors. Meanwhile, further analysis of the trend revealed dominance of the bears throughout the month as the key benchmark indices ranged between 20, and 20, basis point- indicating volatility as market shed basis points in the volatile month. Analysis of first ten trading sessions in the month (i.e. Feb. 1 st to Feb. 15 th 2001) revealed absence of the bargain side as the bears dominated the market as most market participants appeared pessimistic towards market at large as ASI sheds above 400 basis points while Insurance subsector remained the worst hit among major subsectors during the period under review as revealed in the movement of NSE sectoral indices. The banking subsector experienced a weak rally as NSE Banking closed with 0.41% upbeat as against -1.51%, -1.27% and -0.54% loss recorded by NSE 30, NSE Food and NSE Oil & Gas respectively On the other hand, the last ten trading sessions of the month witnessed reduced volatility as market recorded improved patronage towards banking and other financial stocks while Oil & Gas sector experienced a bullish run as reflected in the movement of major NSE sectoral indices. The Monthly NCM Report for February Page 3

4 Nevertheless, the blue chip and Food & beverages stocks particularly in the Consumer Goods sector of the market remained depressed while ASI recorded -0.94% loss during this period with aggregate of -3.21%, indicating loss of basis points for the month as the key benchmark indices closed lower at 20, Further analysis revealed that the marginal gain of 0.99% recorded in the previous month has been erased, putting year to date performance at -2.51% as against the 3.64% year to date gain as at February 28 th 2011, although similar bearish trend was observed in the month to close with -2.64% loss. This however revealed that the Nigerian Capital Market is still within the ambit of bears as the market concerns remained the same. In the reality, nothing fundamentally has changed in the market as regards to the state of the market. Though, series of initiatives have been considered to revitalize the weak market fundamentals and awaken the depressed investors confidence while we expect a vote of confidence from government through debt forbearance to brokers/dealers to jump start the proprietary trading in the market as we have noted in our previous report. On final note we commend the management of NSE, regulators and stakeholders for the unrelenting concerted efforts towards ensuring the transparent and efficient market in the short term and for long term benefit. The demutualization process is on course as the management of NSE remained focused on the issue. In the month, the contributory factors for the performance can be located in the following indices as outlined below: Negative Factors in the market Pessimistic trading still a concern Hike in cost of living and other consumer products High state of insecurity Liquidity sequence Attractive rates in money market and other alternative investment vehicles low lending to the private sector Banks are yet to commence active lending Investor s confidence is low Absence of Margin loans Increase of Federal government and state bonds in market. High lending rates. Low commitment Positive Factors in the market Stable MPR Low valuation and penny posture on equity prices The Monthly NCM Report for February Page 4

5 Market Concerns: persistent Low commitment as speculative and cautious trading dominated while this will continue to reign in the market as low market confidence and weak market fundamentals still lingering in the face of attractive rates in the money market. More so, liquidity is still an issue while most local/retail investors lack active purchasing power due hike in cost of living and other consumer products. 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 lending to real sector as competition in the banking sector will drive this Introduction of securities lending and borrowing in the market Improved regulatory oversight Improved Security level Inflation and Monetary Policy rates Increased activities in the bond market as government appeared broke Liquidity challenges as priorities will compete for cash Outcomes Active lending is yet to commence as there was slight lull in the banking sector due to uncertainty that surrounds credit line from foreign counterparts. The process is on and this expected to improve market activities and marketability of the securities NSE maintains strict posture against non compliance Insecurity of business environment increased and this impacted market negatively. Inflation remained high due to hike in fuel price and this had direct negative impact on the retail end of the market, though MPR remained unchanged. Bond market sustained improved outlook as FG and states government bonds dominated market with attractive yield at the detriment of corporate bond and equity market There was no improvement, considering the low turnover observed in the market. Proshare Research Developments in the coming months: Improved lending to real sector as competition in the banking sector will drive this. Likely liquidity challenges for banks as regards to foreign credit line Introduction of securities lending and borrowing in the market Positive response to debt leniency to brokers and dealers Increased activities in the bond market as government appeared broke Dematerialization of shares Inflation and Monetary Policy rates Liquidity challenges as priorities will compete for cash Improved regulatory oversight The Monthly NCM Report for February Page 5

6 Continued cleanup of market irregularities by NSE continued effort towards infrastructure development Sustained support towards real and agricultural growth Change in Monetary Policy Rates 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 Market: Dips by as Pessimistic trading dominates The market in this month recorded a total volume of 8.05 billion units valued at N44.94 billion (US$ million) exchanged in 76,450 deals compared with 6.49billion units valued at N60.60bn (US$404.04million) exchanged in 119,47deals in February Comparing, the volume and value traded in the months reveals a growth of 24.05% in volume and % value dip when compared with the previous year s comparable period respectively. Market capitalization this month depreciated by N210.32billion (US$1.40billion) as against appreciation by N225.86billion (US$1.50billion) recorded in February Market capitalization recorded a positive figure of N29.07billion (US$ million) in the preceding year s comparable period. The Market Game Changers: Pessimistic trading was observed as investors remained wary while absence of positive news in the market and illiquidity contributed to the outlook recorded. Other contributory factors remained increased insecurity of the business environment, hike in cost of living and the need to meet important domestic affected the retail end of the market while debt crisis in the Europe could not isolated from this as well. The Monthly NCM Report for February Page 6

7 Nevertheless, we remained optimistic that the incoming initiatives in the market as a result of concerted effort to improve liquidity status while the low valuation of equities and expectation of improved Q4 earnings report with rewards are likely to incite speculative and moderate buying. The Monthly NCM Report for February Page 7

8 The NSE All-Share Index Movement The key benchmark indices sheds above 600 basis points to close weak at 20, with high volatility as market ranged between 20, and 20, Market pattern basically reveals that market is technically appeared weak and bearish in short and long term as could be seen from the NSE ASI moving averages trend with index of 20, as at February 29 th 2012 trading below its 20 days,50 days and 200 days moving averages of 20,502.07, 20, and 21, respectively. Source: NSE, Proshare Research COMPARISON OF 2011 AND 2012 MARKET PERFORMANCE The market performance in February 2012, when compared with the 2011 comparable period; showed a downtrend. In the period under review, ASI recorded -3.21% depreciation compared with -2.64% depreciation recorded in February 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. The Monthly NCM Report for February Page 8

9 Dates NSE ASI Market Capitalisation (trillion) Market Capitalisation ($ billions) Jan , Feb , Feb , Monthly Return -2.64% -2.58% -2.58% Yearly Return 3.64% 3.74% 3.74% Jan , Feb , Feb , Monthly Return -3.21% -3.35% -3.99% Yearly Return -2.65% -2.61% -3.26% Source: NSE, Proshare Research From the table above, the year to date performance as at 29 th February, 2012 closing at -2.65% against the previous year comparable period as at 28 th February, 2011 with +3.64% appreciation, indicating a significant decline over the trend recorded last year. Transactions Volume and Value Trend Market Feb '11' Feb '12' % Change Average Daily Volume of Stocks Traded (N millions) % Average Daily Value of Stocks Traded (N'millions) 3, , % Average Daily Value of Stocks Traded (in USD$ millions) % Total Volume of Stocks Traded (in millions) 6, , % Total Value of Stocks Traded (in N'millions) 60, , % Total Value of Stocks Traded (in USD$ billion) % New Listing and Delisting Jan '11' Jan '12' Number of Equities Delisted 0 0 Number of New Listings 0 0 Source: NSE, Proshare Research The Monthly NCM Report for February Page 9

10 The transaction volume in month of February when compared with the previous year comparable period closed higher by % to close at 8.05 billion units compared with 6.49 billion units traded in February 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 N44,94 billion ($ million) compared with N60.60 billion ($ million) of February SECTORAL INDEX MOVEMENTS NSE 30 NSE Food NSE Banking NSE Insurance NSE Oil 01-Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Feb , Monthly % Change -1.91% -6.20% 7.98% -1.91% 1.22% Source: NSE, Proshare Research The Monthly NCM Report for February Page 10

11 In the month under review, three sectoral indices experienced volatility to close in the negative zone led by NSE Food & Beverages (-6.20%), NSE Insurance (-1.91%), NSE 30 (-1.91%) while NSE Banking topped performance for the month with (+7.98%) and NSE Oil & Gas recorded by +1.22% gain. More so, when compared trends of sectoral indices in February 2012 with February 2011, it was revealed that two NSE sectoral indices recorded positive postures in current year as against one positive posture experienced in previous year comparable period. The Monthly NCM Report for February Page 11

12 NSE SECTORAL TREND The sectoral index trend revealed that only NSE banking index experienced low volatility despite improved activities and patronage in the sector. All other sectoral indices experienced volatility considerably as NSE Food appeared the worst hit during the bearish month. Top Ten Trades for the February 2012 UBA topped the transaction volume for the month while banking stocks dominated the charts with Ten of the stocks in the financial sector emerging in the top ten trades chart for the month. The Monthly NCM Report for February Page 12

13 Top Ten Traded Sectors for the month Sector Total Trades Total Volume Total Value % Contribution Financial Services 44, ,235,134, ,316,348, % Consumer Goods 14, ,307, ,688,109, % Services 3, ,589, ,271, % Oil & Gas 6, ,721, ,494,807, % ICT ,308, ,892, % Industrial Goods 3, ,591, ,517,204, % Agriculture ,071, ,759, % Healthcare ,332, ,702, % Conglomerates 1, ,235, ,022, % Construction/Real Estate ,648, ,161, % Top 10 Traded Sectors 75, ,447,939, ,741,279, Total Traded Sectors 75, ,450,011, ,773,751, Recall Top Ten Traded Sectors for the February 2011 Sector Total Trades Total Volume Total Value % Contribution BANKING 70, ,494,288, ,294,529, % INSURANCE 4, ,232, ,893, % MARITIME 2, ,408, ,564, % FOOD/BEVERAGES & TOBACCO 9, ,026, ,720,877, % PACKAGING 4, ,658, ,881, % MORTGAGE COMPANIES ,215, ,069, % BUILDING MATERIALS 2, ,428, ,642,988, % HEALTHCARE 1, ,763, ,332, % MEDIA ,467, ,550, % PETROLEUM(MARKETING) 5, ,953, ,838,250, % Top 10 Trades 103, ,935,442, ,238,938, Total Trades 119, ,497,107, ,606,404, Source: NSE, Proshare Research The Monthly NCM Report for February Page 13

14 Top Ten Gainers & Losers in the month of February Source: NSE, Proshare Research Top Ten Gainers & Losers in February 2011 Source: NSE, Proshare Research The Monthly NCM Report for February Page 14

15 Analyst Opinion The high pessimistic trading observed throughout the month despite low valuation of equities could not be isolated from the lack of risk appetite and lackluster posture of the investors as market direction was not clear. Though, dull and unimpressive trading activities dominated most markets around the globe. More so, we observed that lack of positive news to halt the downtrend in the market also contributed to the negative outlook while the market concerns remained the unchanged as regards to liquidity squeeze and low confidence in the market. In addition, the Euro debt crisis continued to influence foreign investment portfolio as there were traces that some big traders reduced their exposure in the market during the month. Apart from this, the unclear economic direction and growing hardship in the economy, as we have witnessed gradual increase in price of consumer goods and transportation coupled with low liquidity in the system as MPR remained tightened while banks are yet to commence active lending, contributed to the weak bargain position as investors cut down on their investment considerably for feeding- this was observed to have hindered retail trading during the period. However, we remain cautiously optimistic towards coming periods as we envisage short term speculative trading and bullish run in the market while we expect investors to take strategic positions ahead the earning report season. The Monthly NCM Report for February Page 15

16 The Monthly NCM Report for February Page 16

17 The Monthly NCM Report for February Page 17