Investors lose N674bn in 3 days
Investors on the Nigerian Stock Exchange recorded a massive loss of N674 billion last week as equities continuously declined between Wednesday and Friday.
The market capitalisation of the Exchange, which opened the week at N12.640 trillion, closed at N11.966 trillion even as the All-share Index that measures the aggregate value of listed stocks recorded a drop of 5.85 percent in value, closing at 37,249.93 basis points from 39,564.79 points.
There is the fear in the market that some of the foreign institutional investors and foreign portfolio managers who account for 43 percent of the investors on the Nigerian bourse may have started to review their holdings in the market as the massive value erosion came on the heels of the bubble concern raised by Bloomberg on Tuesday concerning some stocks on The Exchange. Bloomberg specifically mentioned Unilever Nigeria Plc and Nestle Nigeria Plc, two of the leading blue-chip stocks on the exchange.
The report with the title: “Unilever to Nestle Raise Nigeria Bubble Concern on Valuation” states that, “Investors are valuing shares of Nestle SA and Unilever’s Nigerian units at about twice the level of their European parents, as faster growth in Nigeria lifts consumer stocks to record highs, reports Bloomberg. “The 53 percent surge in Nestle Nigeria Plc this year pushed shares to 33 times estimated profit, almost double the ratio for Zurich-listed Nestle and up from a discount last year. Guinness Nigeria Plc is trading at a 53 percent premium, relative to its parent, Diageo Plc. Unilever Nigeria Plc has a price-to-earnings multiple of 38, compared with 18 for Unilever which is based in London and Rotterdam. “While bulls say the gains in Nigeria are justified by the economic expansion in the country, Hermes Fund Managers Limited and Renaissance Asset Management see the valuation gaps as signal shares are too expensive.
All three units reported profit declines in the period ended March, as accelerating inflation and an Islamist insurgency in the north curbed spending by the nation’s 170 million citizens.
“There may be a correction,” Lanre Buluro, the head of research at Lagos-based Primera Africa Securities Ltd., said by phone on May 23. “People will start looking to re-evaluate and move this money somewhere else.” An investment analyst said that foreign investors who account for 43 percent of investors on the Nigerian Stock Exchange who were not convinced at the high tempo of share appreciation on the exchange may have started exiting the market. Last week loss was so profound that all the NSE indices depreciated. Apart from the All-Share Index recorded loss of -5.85 %, also NSE Consumer Goods lost -7.05%; NSE Banking, 7.23%; NSE Insurance, 2.87%; NSE Oil/Gas 5.82%; NSE-Lotus II, 7.21%; NSE Industrial Goods, 6.59% and NSE-ASeM, 1.24%.
The NSE All-share Index with year-to-date value of 40.9% the upper week, came down to 32.66% last week; NSE 30 closed year-to-date value at 33.21% last week from 41.50 the upper week. NSE Consumer Goods Index which was 35.43% upper week came down to 25.88% past week. The NSE Banking Index, which was 31.96% the upper week, closed last week at 22.42%, while NSE Insurance Index which was 21.07% year-to-date last week was 24.64% the upper week. NSE Oil/Gas Index, which was 24.82% the upper week, came down to 17.56% last week. NSE-Lotus II which was standing at 61.67% the upper week came down to 50.01% last week. NSE-Industrial Goods Index which came down to 60.57 % last week was 71.89% the upper week. NSE-ASeM Index which was 1.80% year-to-date upper week came down to 0.54% last week. Also, out of the stocks which traded on Monday, 34 stocks recorded appreciation, while 22 recorded some level of value erosion and 56 stocks remained unchanged in value.
On Tuesday, 127 stocks took part in the day transactions. Out of this, 50 recorded value addition while 17 recorded some form of decline and 60 were unchanged. On Wednesday, a total of 122 stocks took part in the market activities, out of which 32 recorded value appreciation and 36 declined with 44 unchanged. On Thursday, out of the 126 stock that took part in the market activities, only 15 recorded appreciation, while 57 recorded decline and 54 did not change in value. On Friday out of the 120 stocks that took part in the day transactions, 22 recorded gains, while 32 recorded losses and 66 were unchanged. A stockbroker, who spoke to Daily Newswatch on the issue agreed that most of the stocks affected by value erosion last week were the stocks with high foreign interest. He, however, expressed hope that things would normalise this week as he does not see the local investors who currently account for 67 percent of the market following the footstep of the foreign investors.