MSCI removes Forte Oil, FBN, PZ and Guinness from frontier market index
by LOLADE AKINMURELE
November 15, 2017 | 2:00 am| | | Start Conversation
In what is likely to stoke some sell pressure on affected stocks, US-based index provider, Morgan Stanley Capital International (MSCI), has deleted Forte Oil, First Bank Nigeria Holdings, Guinness Nigeria and PZ Cussons Nigeria from its main frontier markets index, with effect November 30.
The aforementioned companies, save for Forte Oil, were added to the Frontier Markets Small Cap Indexes, MSCI said Tuesday, as it unveiled the results of its just concluded November 2017 Semi-Annual Index Review that saw notable changes across its major equity indexes.
At the same time, Cadbury Nigeria, Diamond Bank, First City Monument Bank, GlaxoSmithKline Nigeria, Skye Bank and Sterling Bank have been deleted from the MSCI Frontier Markets Small Cap Indexes.
Seven of the affected companies saw a decline in share price on Tuesday, while two were unchanged, with Forte Oil the only stock to have climbed, according to data compiled by BusinessDay and sourced from the Nigerian Stock Exchange (NSE).
Forte Oil rose 1.4 percent to NGN48.62 per share on Tuesday, while First bank and Guinness Nigeria declined 1.67 percent to N7.08 and 1.97 percent to N100.
PZ Cussons Nigeria also declined 2.61 percent to N22.40, while Cadbury Plc declined 4.3 percent to N11.78. Diamond bank fell 2.6 percent to N1.12. FCMB slumped 0.87 percent to N1.14. GSK and Skye bank were unchanged at N25 and N0.5 respectively.
Sterling bank declined 1.92 percent to N1.02.
“We expect funds that passively track the (MSCI) index to begin underweighting the deleted securities and subsequently phase them out from their buckets overtime,” said Tosin Ojo, head of research at Lagos-based investment bank, Cardinal Stone, who sees Forte Oil faring much worse given that it has been completely removed from all MSCI indices.
“On the other hand, we expect the impact on the prices of FBNH, GUINNESS and PZ to be milder as the increased demand from Funds that track the Small Cap index may provide some sort of buffer to the sell-offs from funds that track the main MSCI Frontier market index.
“More so, we think these changes in the Frontier Market Index may also favour the remaining Nigerian securities in the index as they are likely to be reweighted upwards,” Ojo said in a Nov. 14 note to clients.
The retained securities on the MSCI frontier index are those of Nigerian Breweries, Guaranty Trust Bank, Zenith bank and Nestle Nigeria.
Nigerian Breweries rose 0.55 percent to N139.75 Tuesday, while GTB, Zenith and Nestle fell 0.31 percent, 4.67 percent and 3.1 percent to N41.56, N23.68 and N1, 250 per share respectively.
Other retained securities are Dangote Cement, United Bank for Africa, Access bank and Stanbic IBTC bank. Seplat, Ecobank Transnational Inc, WAPCO and Unilever.
Dangote Cement declined 0.6 percent to N236.55 Tuesday. UBA, Stanbic and Access banks’ share prices were unchanged at N9.55, N42.5 and N9.91 respectively.
Seplat and Ecobank were also unchanged at N495 and N17 respectively.
WAPCO and Unilever fell 2.82 percent and 5 percent to N50 and N38 respectively.
Nigerian stocks fell marginally on Tuesday, according to data available on the Nigerian Stock Exchange (NSE) website, with the All Share Index declining 0.96 percent to 36,953.41 on the back of an outburst of sell pressure.
All NSE sector indices witnessed declines, save for the Oil and Gas (NSEOILG5) index which advanced marginally by 0.15 percent. The banking index (NSEBNK10), NSEFBT10, NSEINS10 and NSEIND indices declined by 1.38 percent, 1.30 percent, 0.06 percent, and 1.39 percent respectively.
“We could see some sell pressure on stocks deleted from the MSCI Frontier Markets Small Cap Indexes in the coming sessions, while the stocks that remain in the main MSCI Frontier Markets Indexes may see some buy interest as investors rebalance their holdings,” analysts at Lagos-based financial advisory, Investment One said in a Nov.14 note to clients.
Capital controls and acute dollar shortages in Nigeria that made repatriation of profit by foreign investors almost impossible, prompted MSCI to announce in June 2016 that it was considering a possible downgrade to stand-alone status for Africa’s biggest economy.
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