Profit-taking in Oil & gas, consumer goods stocks slump equities market by N59bn in Q1


By Olabode Jegede

Investors’ profit-taking in Oil & Gas and Consumer goods stocks listed on the Nigerian Stock Exchange (NSE) down the equities market segment by N59 billion in first quarter (Q1) of 2019.

Market capitalisation (market cap) is the market value of a publicly traded company’s outstanding stocks had opened the year at N11.672 trillion and closed March 29, 2019 at N11.731 trillion, translating to N59 billion decline.

Despite the foreign and domestic challenges, investors’ profit-taking in above indices’ led to equities market decline in Q1 as other indices’ recorded marginal decline.

Findings by our correspondent revealed that investors’ profit-taking in the stocks of Seplat Petroleum Development Company Plc, and 11 Plc dragged the NSE Oil & Gas index to 290.52 basis points in Q1 2019 from 302.23 basis points it opened for trading this year while the NSE consumer goods index dropped by 5.01 per cent to 711.29 basis points from 748.83 basis points it closed 2018.

Investigation by our correspondent revealed that stock price of Seplat Petroleum Development Company in Q1 2019 dropped to N590.00 from N640.00 the equities market opened for trading in 2019.

Stock price of 11, a downstream company also dropped to N178.00 from N185.50 it opened for trading this year, representing a decline of 4.04 per cent or N7.50.

Similarly, sell-off in Dangote Sugar Refinery Plc, Flour Mills Nig. Plc and Honeywell Flour Mill Plc stocks depreciated the NSE Consumer goods by 5.01 per cent to 711.29 basis points as at March 29 from 748.83 basis points it opened for trading this year.

Analysts explained to that investors in the capital market reacted to weak corporate earnings of Dangote Sugar Refinery, Flour Mills Nig. and Honeywell Flour Mill.

The three posted significant decline in nine months ended results released to The Exchange in early February.

NSE Consumer Goods Index dropped by 2.12 per cent to 1,227.72 basis points in Q1 from 1,254.34 basis points it closed 2018.

Consequently, the general market performance, NSE All-Share Index, an index that tracks the general market movement of all listed equities on the Exchange, including those listed on the Alternative Securities Market (ASeM), regardless of capitalization dropped to 31,041.42 basis points, 1.24 per cent below 31,430.50 basis points the market opened this year.

Further findings revealed that NSE Banking Index, NSE Lotus II appreciated by 1.26 per cent and 1.51 per cent to close Q1 at 403.96 basis points and 2,267.64 basis points respectively, while Industrial Goods Index appreciated by 0.15 per cent to close the quarter under review at 1,239.73 basis points.

Capital market analysts who spoke with our correspondent attributed the downward equities market in Q1 to political unrest, leading to foreign investors to exit the market.

The MD/CEO, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo responding to equities market performance in first quarter said, the delayed passage of 2019 budget and political unrest are eroding impressive corporate earnings of listed companies on NSE.

According to him, “For now, I think a lot of things are still not yet in place and it is affecting impressive corporate earnings of listed companies. The 2019 budget is still pending. The buildup to 2019 general elections and after has led the opposition to contest the outcome and at the same time, the foreign portfolio investors who have pulled out before are not yet convinced to come back.

“More so, for the fact that we are seeing the audited financial statement being released, that implies that we still require the result of the first quarter to be able to consolidate what we have already seen.”

The Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said that the heightened political risks affected the decline in the equities market in Q1.

According to him, “we saw a year that was impacted and dominated by political activities. So, the decline we saw in the first quarter and that of the month of March was as a result of heightened political risks and those risks included the postponement of the presidential election.

“We saw that the market dropped three trading days immediately after the postponement. That heightened political risk was the major contributing factor, even after the presidential election as the gubernatorial election came with a lot of uncertainties.

He explained that  “A number of states were declared inconclusive. So, it did not allow for the quick resurrection of the political risks which made investors shy away from equities. “

The bourse had explained that Brexit talks, US-China trade tensions and possible slowdowns in the global economy are some of the external factors that may impact on NSE’s market performance this year.

The Chief Executive Officer, NSE, Mr.  Oscar Onyema early in the year said, “We expect that the stable economic activity across Emerging Markets, following a stalled rally in the US Dollar and expectations of stronger fundamentals within Africa’s frontier market securities will be favorable to the Nigerian market.

“Domestically, we believe market sentiments in the first half of the year will be driven by uncertainty in oil prices as well as the 2019 general elections. Accordingly, we anticipate volatility in equities markets in H1 2019, with enhanced stability post-elections.

“We believe swift approval and implementation of the 2019 budget will have a positive impact on companies’ earnings as well as consumer spending. Therefore, we expect a return of primary market activities during the year with an uptick in market activity during the second half of 2019.

“The NSE’s focus for 2018 has been on organization restructuring, customer centricity, market development, and innovation. We expect to advance our efforts in these areas in the coming year and capitalize on the milestones reached thus far.

“In 2019, we will continue executing on our 2018-2021 strategy, working even more closely with our stakeholders particularly our market intermediaries to onboard new financial instruments and maximize organizational value.”