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C&I Leasing, Fidson, May & Baker lead NSE 37% gains

by IHEANYI NWACHUKWU & TELIAT SULE

November 7, 2017 | 1:45 am
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Equity investors successfully booked the largest chunk of capital gains in the shares of C&I Leasing Plc, Fidson Healthcare Plc, and May & Baker Nigeria Plc following about 200 percent rise in their share prices year-to-date (Ytd).
C&I Leasing Plc stock recorded the biggest ytd increase of 244 percent to N1.72; Fidson Healthcare Plc followed with a 208 percent price gain to N3.95; while May & Baker Nigeria Plc stock advanced to N2.75, an increase of about 187percent.
“The NSE has benefited from a ‘sweet spot’. The oil price is off the floor, reserves accumulation has been impressive and the Federal Government has made some positive steps on deficit financing,” according to Gregory Kronsten-led team of analysts at Lagos-based FBNQuest.
The Nigerian Stock Exchange (NSE) all share index has gained 37 percent this year driven largely by the offshore investor response to the FX window for investors and exporters (NAFEX).
Other stocks that have had impressive returns include that of Stanbic IBTC Holdings Plc with record 184 percent increase to N42.60; International Breweries Plc achieved 144.3 percent gain ytd to N45.2; while Dangote Sugar Refinery Plc recorded 151.2 percent growth to N15.30.
As at September 30, analysis of transactions on the Nigerian bourse shows a record high of N1.65 trillion with foreign investors accounting for N783.34 billion or 47.4 percent.
While the market rallies Pension fund administrators (PFAs) in the country are largely underweight in exposure following the allocation of just 8.7 percent of their assets to listed stocks at the end of September.
A new National Pension Commission (PenCom) regulation prescribing a new multi-fund structure for Retirement Savings Account that encourages greater equity exposure allows a maximum of 30 percent exposure to equities for Fund I, up from a 25 percent cap under the old structure.
Pension Funds had gross assets of N7.16 trillion as at September 2017. In 2007, when equity prices were rising rapidly, about 30 percent of pension fund assets were in equities.
The fall in equity markets in late 2008 and into 2009 caused a rotation from stocks to bonds as PFAs became extremely risk averse.
“Unlike pension fund managers in other emerging markets, Nigerian PFAs’ allocation to equities remains very shy at less than 10 percent which suggests that pension assets may have missed the 37 percent year to date rally in the equities market. Tier-1 bank stocks like UBA, Zenith and GTB have seen stronger growth in price appreciation. The shy allocation to equities perhaps explains why the average return on pension assets has been in early teens of 14 percent despite the sterling performance of the market and relatively high yield environment,” said Abiola Rasaq, head investor relations, the United Bank for Africa (UBA).
In the third-quarter (Q3) to September 30, 2017, the Nigerian Stock Exchange (NSE) achieved about 130.33 percent increase in average daily value of stocks traded on its platform.
This was valued at N5.72billion ($18.71) million compared to N2.48 billion in the corresponding period of 2016, according to the NSE Q3 fact sheet. In the 52-week period to September 2017, the average daily transactions at 3,999 rose by 13.43percent against 3,525 in Q3’16.
Gains in the equity market saw the NSE All Share Index (ASI) reach a three-year high, while the total market capitalisation climbed to N19.62 trillion ($64.16 billion), representing an 18.73 percent increase from N16.52 trillion ($54.04 billion) in Q3 2016.
The equities market witnessed increased inflows as investors took position in value stocks ahead of the third-quarter (Q3) earnings releases as well as end of the month rebalancing of portfolios by fund managers.
Third-quarter earnings season brought some strong results from leading banks and non-banks. Also, United Capital analysts expect the equity market to stay upbeat “as economic fundamentals continue to improve on the backdrop of the recent oil rally.”
While the equity market is poised to sustain the recent rally, analysts have called for a better understanding of the investment environment so that pension contributors could get more value on their savings.
“Even as PFAs’ conservative appetite which is aimed at preserving value for contributors is appreciated, return on assets may become a major benchmark for competition as contributors seek real positive return on their pension savings to accommodate the inflationary environment. And should the transfer window eventually happen, pressure may mount on PFAs to deliver competitive return on investment,” Rasaq added.

 

IHEANYI NWACHUKWU & TELIAT SULE

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by IHEANYI NWACHUKWU & TELIAT SULE

November 7, 2017 | 1:45 am
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