The Nigerian equities market closed the month of August on a bearish note, shedding N587 billion in market capitalisation.
This is due to weak investor participation and disruptions associated with the transition to a new settlement structure.
The market capitalisation, which opened the month at N158.326 trillion, declined by 0.37 per cent to close at N157.739 trillion.
Similarly, the All-Share Index (ASI) dropped by 1,084.29 points, or 0.44 per cent, from 245,283.68 recorded at the beginning of the month to 244,199.39 at the close of trading.
The market recorded 13 sessions of losses against seven sessions of gains during the 20 trading days in August, reflecting the sustained selling pressure that characterised much of the month.
In spite of the decline in market capitalisation, trading volume increased by 50.8 per cent, with investors exchanging 26.867 billion shares valued at N634.801 billion in 899,053,057 deals.
This compared with 17.817 billion shares valued at N1.184 trillion in 1,166,154 deals recorded in July.
The figures showed that while trading volume increased, value traded declined by 46.4 per cent, while the number of deals also fell by 22.9 per cent.
Market analysts attributed the subdued performance partly to disruptions arising from the implementation of the new settlement structure, which affected the participation of some key investors.
Mr Tajudeen Olayinka, Managing Director, Wyoming Capital and Partners, said recent adjustments to the equities market settlement system had, however, helped to ease the disruptions and improve liquidity.
Olayinka said this in an interview with newsmen while assessing the market’s August performance and outlook for September.
He said the market experienced significant disruption from late July through August, as some key investors, particularly foreign investors, stayed away due to challenges associated with the new settlement structure.
According to him, the new system required investors to pre-fund transactions, a development that affected the participation of some foreign and local investors.
“The disruption was likely from the non-immediate acceptance of the new structure by some instructional investors, mostly foreign, and even some local investors,” he said.
Olayinka said that the situation affected expected market activities as investors adjusted to the new settlement cycle.
He, however, said subsequent fine-tuning of the system had helped to restore confidence and improve liquidity in the market.
He specifically referred to adjustment to the settlement timeline, including the extension of the deadline for settlement-related debit alerts from noon to 5.00 p.m. the following day.
“Those little fine-tuning have helped to bring back the markets, the best way we understand it,” he said.
The market expert expressed optimism that the improvements recorded toward the end of August could provide a platform for a stronger performance in September.
He said increased liquidity and renewed reactions from investors were already becoming evident in the final trading sessions of August.
He said the FTSE Russell’s confirmation of Nigeria’s reclassification to Frontier Market status in the course of the month of Sept. would also influence a positive sentiment for the market.
“Last Friday and today, we are beginning to see some reaction.
”I’m not going to say that it will be sustained that way, but of course, we’ll see more improvements in terms of positive responses from all these investors,” he said.
Olayinka identified institutional investors as particularly important to the market’s recovery, stressing that their participation could have a significant influence on liquidity and overall market direction.
“Institutional investors hold the key to what happens in the market. Anytime they stay away like that, it gives some kind of issue,” he said.
He said that that the easing of settlement-related challenges would encourage greater investor participation and support an improved rally in September.
In spite of the overall bearish performance, several banking stocks recorded gains during the month.
First HoldCo led the gainers, rising from N129.55 to N145 per share, while United Bank for Africa appreciated from N44.50 to N47.35.
Zenith Bank gained from N123.55 to N127.40, Access Holdings advanced from N26.30 to N32.10, while Guaranty Trust Holding Company rose from N130 to N133 per share.
Seplat Energy also gained, rising from N11,363.90 to N12,320.60, while Eterna advanced from N33 to N35.80 per share.
On the losers’ table, Aradel Holdings declined from N1,526.80 to N1,415, while Oando fell from N36.60 to N34.
RT Briscoe dropped from N12.60 to N11.40, Learn Africa declined from N10.40 to N8.70, while MTN Nigeria fell from N837 to N807 per share.
Insurance stocks were also affected by the bearish sentiment.
Fortis Global Insurance declined from N2.34 to N1.94, International Energy Insurance fell from N4.15 to N2.82, while AXA Mansard Insurance dropped from N13 to N12.
NEM Insurance declined from N34.20 to N30.95, while Consolidated Hallmark Holdings fell from N8.36 to N6.01 per share.
Pharmaceutical stocks also recorded losses, with Fidson Healthcare declining from N93.55 to N79, May & Baker falling from N40 to N37 and Neimeth International Pharmaceuticals dropping from N8.50 to N7.90 per share.
Meanwhile, Okomu Oil, Wema Bank, Dangote Cement, Skyway Aviation Handling Company, Conoil and Academy Press remained unchanged at N1,418, N29, N1,034, N171.20, N210 and N6.15 per share, respectively.
With liquidity conditions improving and settlement-related concerns gradually easing, investors will be watching September closely to determine whether the late-August recovery signals the beginning of a sustained rebound or merely a temporary respite from the market’s bearish spell.