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Increased liquidity from budget implementation to drive stock market – Sterling Capital
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As the year gradually creeps into the second quarter, financial analysts and economic watchers at the weekend concluded that the stock market would continue to benefit from increased systems liquidity, as government begins to implement the budget.
According to analysts at Sterling Capital Markets Limited, the investment banking division of Sterling Bank plc, it is also expected that many of the big banks, who have had to wind down their activities in view of their year end will return to take positions in the market.
The company in its outlook for the second quarter of 2008 noted that it expects the recent market developments to minimize speculative activities and reduce opportunities for economic rent.
“The market will however, continue to hold a lot of prospects for a long time to come for real investors with long time investment horizon”.
Although the report noted that the bullish trend witnessed in 2007 was reversed towards the end of the quarter, following delayed release of the 2008 Federal Government Budget which affected government spending.
Consequently, the Nigerian Stock Exchange (NSE), All-Share Index rose by 8.67 percent to close the quarter at 63,016.56 points from 57,990.22 points recorded in December, 2007. “This compares adversely with a yield of 30.93 percent recorded in the equivalent period in 2007. Other factors that could be attributed to this development include the profit taking activities of investors and the balance sheet management activities of major banks whose year end fall in March. The investigation of some companies by the Securities and Exchange Commission (SEC), following allegations of price fixing may have also induced panic selling”.
At the end of the quarter, a turnover of 68.55 billion shares valued at N990.41billion was traded in contrast to a turnover of 26.2 billion shares valued at N335.62 billion recorded in the equivalent period of 2007. This represents an increase of 161.65 percent over the 2007 figure. A combination of price appreciation and new listing led to increase in market capitalisation to N12.12 trillion by end March from N10.18 trillion by end December, 2007.
While, the NSE All-Share index grew by 8.67 percent in the first quarter of 2008, some equities recorded significant growth of over 900 percent in terms of appreciation in their prices. For instance, Premier Paints plc, a company in the Chemical & Paints sub-sector soared by 914.88 percent, from a price of N1.21 at the beginning of the quarter to N12.28. The stock was inactive for many years, but rode on positive market sentiments. Alumaco plc appreciated by 768.97 percent, from N3.90 to close at N33.89. he price rallied to a high of N31.20 and closed theyear at N17.05 per share. Morison Industries plc in the Healthcare sub-sector closed the year with a growth of 759.04 percent, having appreciated from N2.71 to N23.28. This follows improvements in the activities of the company which translated into better financial performance. Juli Plc, a company in the Second-tier sector returned 714.55 percent, Arbico Plc in the Construction sector had a return of 523.26 percent. Nigerian Enamelware Plc had a return of 457 percent, while Greif Nigeria Plc returned 456.16 percent during the period. Others were John Holt Plc, which returned 339.42 percent, and International Breweries Plc which returned 296.89 percent moving from N2.57 to N10.20 following the injections of new funds by way of offer for subscription. Scoa Nigeria Plc returned 288.77 percent closing the quarter at N18.00 from N4.63 at the beginning of the quarter.
The report indicated that the Nigerian financial industry has remained one of the fastest growing, following the on-going reforms in the Banking and Insurance Industry.
“Nigeria is now increasingly being integrated into the global financial system as more Nigerian institutions spread across Africa and other areas of the World. At the same time, global banking institutions are establishing offshoots in Nigeria”.
However, it was observed that the prevailing environment has meant that businesses, particularly the real sector continued to operate under inclement conditions.
The implication, according to the report, could be noticed in the rate of business failure which has increased especially among small businesses, while the medium to large scale businesses have had to contend with thinning margins in the wake of excruciating energy cost.
A recent survey in major cities indicated that alternative power supply alone added about 200% to cost. Energy cost further increased during the period following the decision of the Department of Petroleum Resources (DPR) to stop the importation of off-spec products. The nation was, once again, confronted with the problems of supply insufficient and distribution bottleneck as long queues were witnessed in various parts of the country.
“While the manufacturing sector appears to be worst hit, some other sectors have been a bit more resilient. The construction industry has fared a bit better because of government patronage and the decision of the Federal Government to pay contractor debts over the last one year. Increased activities in the real estate segment, coupled with the development of mortgage products by Nigerian banks have also helped the sector”.
According to analysts at Sterling Capital Markets Limited, the investment banking division of Sterling Bank plc, it is also expected that many of the big banks, who have had to wind down their activities in view of their year end will return to take positions in the market.
The company in its outlook for the second quarter of 2008 noted that it expects the recent market developments to minimize speculative activities and reduce opportunities for economic rent.
“The market will however, continue to hold a lot of prospects for a long time to come for real investors with long time investment horizon”.
Although the report noted that the bullish trend witnessed in 2007 was reversed towards the end of the quarter, following delayed release of the 2008 Federal Government Budget which affected government spending.
Consequently, the Nigerian Stock Exchange (NSE), All-Share Index rose by 8.67 percent to close the quarter at 63,016.56 points from 57,990.22 points recorded in December, 2007. “This compares adversely with a yield of 30.93 percent recorded in the equivalent period in 2007. Other factors that could be attributed to this development include the profit taking activities of investors and the balance sheet management activities of major banks whose year end fall in March. The investigation of some companies by the Securities and Exchange Commission (SEC), following allegations of price fixing may have also induced panic selling”.
At the end of the quarter, a turnover of 68.55 billion shares valued at N990.41billion was traded in contrast to a turnover of 26.2 billion shares valued at N335.62 billion recorded in the equivalent period of 2007. This represents an increase of 161.65 percent over the 2007 figure. A combination of price appreciation and new listing led to increase in market capitalisation to N12.12 trillion by end March from N10.18 trillion by end December, 2007.
While, the NSE All-Share index grew by 8.67 percent in the first quarter of 2008, some equities recorded significant growth of over 900 percent in terms of appreciation in their prices. For instance, Premier Paints plc, a company in the Chemical & Paints sub-sector soared by 914.88 percent, from a price of N1.21 at the beginning of the quarter to N12.28. The stock was inactive for many years, but rode on positive market sentiments. Alumaco plc appreciated by 768.97 percent, from N3.90 to close at N33.89. he price rallied to a high of N31.20 and closed theyear at N17.05 per share. Morison Industries plc in the Healthcare sub-sector closed the year with a growth of 759.04 percent, having appreciated from N2.71 to N23.28. This follows improvements in the activities of the company which translated into better financial performance. Juli Plc, a company in the Second-tier sector returned 714.55 percent, Arbico Plc in the Construction sector had a return of 523.26 percent. Nigerian Enamelware Plc had a return of 457 percent, while Greif Nigeria Plc returned 456.16 percent during the period. Others were John Holt Plc, which returned 339.42 percent, and International Breweries Plc which returned 296.89 percent moving from N2.57 to N10.20 following the injections of new funds by way of offer for subscription. Scoa Nigeria Plc returned 288.77 percent closing the quarter at N18.00 from N4.63 at the beginning of the quarter.
The report indicated that the Nigerian financial industry has remained one of the fastest growing, following the on-going reforms in the Banking and Insurance Industry.
“Nigeria is now increasingly being integrated into the global financial system as more Nigerian institutions spread across Africa and other areas of the World. At the same time, global banking institutions are establishing offshoots in Nigeria”.
However, it was observed that the prevailing environment has meant that businesses, particularly the real sector continued to operate under inclement conditions.
The implication, according to the report, could be noticed in the rate of business failure which has increased especially among small businesses, while the medium to large scale businesses have had to contend with thinning margins in the wake of excruciating energy cost.
A recent survey in major cities indicated that alternative power supply alone added about 200% to cost. Energy cost further increased during the period following the decision of the Department of Petroleum Resources (DPR) to stop the importation of off-spec products. The nation was, once again, confronted with the problems of supply insufficient and distribution bottleneck as long queues were witnessed in various parts of the country.
“While the manufacturing sector appears to be worst hit, some other sectors have been a bit more resilient. The construction industry has fared a bit better because of government patronage and the decision of the Federal Government to pay contractor debts over the last one year. Increased activities in the real estate segment, coupled with the development of mortgage products by Nigerian banks have also helped the sector”.
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