By Gbenga Agbana and Udeme Ekwere

Monday, 3 Jan 2011

The market capitalisation of the 201 first tier listed equities on the Nigerian Stock Exchange increased by 59 per cent, from N4.99tn at the beginning of 2010, to N7.91tn at the end of the last trading day.

This translates into a N2.9tn gain for investors during the year, despite profit taking activities in the last three quarters.

According to experts, all the indices of corporate performance at the equities sector improved reasonably in 2010 due to investors‘ renewed interest in stocks and high hopes of better days for the Nigerian banking sector.

The birth of the Asset Management Corporation of Nigeria rekindled investors‘ interest in banking stocks and helped to improve the market capitalisation, especially in the second half of 2010. The corporation on Friday wrapped up non-performing loan purchase deals with 21 banks and also issued N1.04tn zero coupon initial consideration bonds due 2013.

The All-Share Index of the NSE rose by 18.5 per cent, from 20,827.17 points at the beginning of 2010 to close at 27,770.52.

Analysts also linked the significant improvement in market capitalisation to the listing of Dangote Cement Plc‘s shares, which enhanced the value of stocks quoted in the equities sector by over 20 per cent.

Further analysis of the performance in the equities sector indicated that the NSE-30 Index rose by 28.01 per cent, from the opening 827.99 to close at 1,081.95 at the end of 2010.

The NSE Food/Beverage-10 Index also rose by 41.2 per cent from 526.71 points at the beginning of the year to close at 778.47, while the NSE Banking-10 Index rose by 18.9 per cent from 339.32 to 399.08 on the last trading day of 2010.

Reviewing the market‘s performance in 2010, the Managing Director, Signet Investment Limited, Mr. Dipo Aina, explained that the market did not perform poorly in the review period and that there were positive signals that it would perform better in 2011.

He said, ”The market did well last year. New listings contributed to the progress of the market. The screening of the new Director-General has been done. Expectations of what the Asset Management Corporation of Nigeria will do in the market are very high. Once the toxic assets are bought off banks‘ books, the market will improve. Expectations are high and the era of uncertainty is no longer there.”

The Managing Director, Vetiva Capital Management Limited, Mr.Chuka Eseka, however, said the market‘s performance was not fantastic in terms of the cost of funds.

But he suggested that the government should evolve policies aimed at stabilising the economy and creating employment. This, he noted, would enhance liquidity in the stock market.

On the 2011 market outlook, Eseka said, ”Things will be positive, but nobody should be fooled that AMCON will do everything. The company will not invest in the stock market. What it will do is to buy the toxic assets of banks. The market will grow next year. There are positive signs.”

Further survey by our correspondents showed that the NSE Insurance-10 Index also dropped by 36.9 per cent from 249.01 points to 168.34. The NSE Oil/Gas -5 Index recorded a 17.83 per cent increase from 288.06 at the beginning of the year to 338.85.

The Chief Responsibilty Officer, Valueinvest Limited, Mr. Seye Adetunmbi, said regulators needed to step up surveillance functionally and appraise the appropriateness of newly introduced rules and operational guidelines, periodically, to ensure a healthy market.

He said, ”There should also be timely intervention in any irregularities in the market. It is important that there must be zero tolerance for infractions with commensurate penalty for apprehended offenders. Also, a consistent informed public awareness scheme is key to restoring the confidence of the investing public.

”Operators must be best-practice driven and face the realities of the market. They should also cooperate with listening regulatory bodies, the Securities and Exchange Commission and the Nigerian Stock Exchange, in agreeing on the best model that will facilitate new breath in the

market. Operators should look at larger pictures with long-term benefits for the market.”

In his review, the Managing Director, Lambeth Investments and Trust Limited, Mr. David Andorin, said the All Share Index stabilised in 2010.

He said, ”The capital market, which declined from an ASI of about 66,000 points in March 2008 to about 20,800 points at the beginning of 2010, eventually stabilised during the year. Up till Friday, the ASI gained almost 20 per cent on a year-to-date basis. For a market that decelerated so sharply in the recent past, returning to profitability currently is an encouraging signal that the future of the market is bright.

”Because of the structure of Nigeria‘s economy, which favours short-term trading activities, where banks are principal facilitators, their resuscitation by AMCON next year will materially impact on corporate earnings and boost profitability of the market.”

He added, ”Sustenance of close surveillance and pursuit of reforms in the entire finance

industry by the regulators in 2011 are desirable for maintenance of financial markets integrity. In this regard, the ongoing cleaning up exercise must proceed with undiminished intensity.

”Finally, we hope that in 2011, the dormant secondary market for bonds through the world class platform of the Nigerian Stock Exchange will be revived. We also hope that the primary market for equities will wake up from slumber.”

 

Source: Punch