ByUdeme Ekwere
Thursday, 3 Feb 2011
EXPERTS have linked the huge losses recorded in equity trading activities on the Nigerian Stock Exchange in the last one week to massive withdrawal of foreign portfolios.
Investigation by our correspondent revealed that some big stockbroking firms like Rencap Securities Nigerian Limited and the stockbroking firm of Stanbic IBTC Plc, had sold off a large portion of shares in the market. This, experts said, contributed to the huge N344bn decline in the market capitalisation of listed equities in the last one week.
These stockbroking firms, among others, have foreign investors as their major clients, according to stockbrokers.
A stockbroker, who spoke on the condition of anonymity, told our correspondent that the development could be traced to the ongoing crises in some African countries, including Egypt, Tunisia and Ivory Coast.
The source, who asked not to be named because of the sensitive nature of the matter, noted that the affected stockbrokers sold off a lot of shares on Monday, leading to a 1.9 per cent decline in major market indicators at the close of that day’s trading.
The market capitalisation of the listed equities, which had closed at N8.885tn last Tuesday, dropped by 3.9 per cent or N344tn in the last one week to close at N8.541tn.
Similarly, the NSE’s All-Share Index fell by 1073.90 basis points or 3.9 per cent to close at 26,723.49, down from 27,797.39 points recorded last Tuesday.
The Managing Director of one of the stockbroking firms also told our correspondent that foreign investors had engaged in panic selling as a result of the African crisis.
He said, as at Monday, we realised that these stockbrokers were selling off huge amounts of their shares for unclear reasons at that time. But now, we have come to understand that it was actually foreign hedge funds that were being sold on instruction from foreign clients.
These clients are worried about the crises that have been rocking some of these North African countries, and since they see Africa as a region, they are worried that the Nigerian market may be affected.
He noted that if there was no material damaging effect on the NSE, the foreign clients might return to the market later.
The Managing Director, Compass Securities Limited, Mr. Emeka Madubuike, said, “It is true that there was some heavy selling in the market and the reason may not be unconnected with the uncertainty in the economy as well as the increase in the benchmark money market rates.
He added that the crises in some of the African countries might have led to major sell-offs in the market.
Crises in Egypt and Ivory Coast that led to a formal eurobond default on Tuesday hit other sovereign debt issues in Nigeria and Africa, sending yields higher as investors fret about political risk.
According to a Reuters report on Tuesday, the yield on Ghana’s $750m 2017 issue, a benchmark for frontier sub-Saharan foreign currency debt, has jumped from below 6.3 per cent to 6.8 per cent in the last four days.
Similarly, the yield on Nigeria’s new $500m benchmark issue has also climbed marginally, to 6.9 per cent, since it started trading last week.
Gabon’s 2017 issue has also seen its yield rise from 5.3 per cent to six per cent as popular protests have gathered steam in Egypt.
Source: Punch
