|Trading session at NSE|
The stock market last week closed the first quarter (Q1) of 2013 on a positive note compared with the negative performance in the Q1 of 2012. Although the Q1 of 2012 was negative, the market later rallied to close the year with a record growth of 34.5 per cent, the best since 2008.
Still relishing the 2012 positive performance, operators and investors were highly bullish that the trend would continue in 2013, citing impressive 2012 financial results as one of the expected bull drivers.
Apparently in line with that expectation, the market closed Q1 of 2013 last week with 19 per cent growth as the Nigerian Stock Exchange (NSE) All-Share Index rose from 28,078.81 to close at 33,536.25. In the same vein, the market capitalisation added N1.759 trillion, growing from N8.974 trillion to N10.733 trillion.
Most of the gains in the Q1 were recorded in the January as cautious trading and profit-taking by some investors in February and March slowed the performance in the two months. While a growth of 13.4 per cent was recorded in January, February accounted for 3.8 per cent and 1.3 per cent respectively. This resulted in a cumulative growth of about 19 per cent in Q1. However, year-on-year, the market recorded a growth of 62 per cent as at the end of the Q1 of 2013.
An Expected Boom Based on the 2012 performance, market operators had predicted that the Q1 would be bullish. Giving his outlook for the market last January, the Managing Director of Partnership Investment Company Plc, Mr. Victor Ogiemwonyi, had said its growth momentum would continue in 2013.
“I expect the market to do better than average in the New Year. The factors that will influence things include the rising confidence and the liquidity that will follow, especially with the year starting with an approved budget. The gradual return of investors will see the market rise in the first quarter and slowly correct any spike that may be too far from the average,” he said.
Speaking in the same vein, another leading stockbroker and Managing Director of Quest Advisory Services Limited, Bayo Rotimi, said the upswing recorded in 2012 would be sustained through the continuation of the ongoing reforms and the faithful implementation of the capital markets reform roadmap.
“The introduction of new products will help deepen and broaden the markets and ensure continued inflow of funds into the capital markets. New listings especially by telecoms, power, transportation and other infrastructure companies would undoubtedly boost market performance in the coming years. Enhanced market liquidity through the injection of long-term funds arising from the review of the investment guidelines by Pension Fund Administrators, the Sovereign Wealth Fund and the ongoing reforms in the insurance industry will also help,” he said.
Similarly, Mr. Tola Odukoya of Dunn Loren Meriffied, said: “I remain optimistic about the market and I equally expect the performance recorded in 2012 will be consolidated in this year. I expect that the key drivers will remain the usual banking, consumers’ goods and cement sectors with a few surprises from other sectors.”
In the opinion of Chief Executive Officer of Lambeth Trust & Investment Company Limited, Mr. David Adonri, said: “Sustaining the trend will depend on the continued attraction of the Nigerian financial market to foreign investors that now dominate. Secondly, the market making machinery must continue its intervention to ensure price stability in the market,” he said.
He had noted that for orderly growth to be achieved in the capital market, rules and regulations must be enforced.
Bull Drivers Although most of the corporate results expected to drive the market just trickled in March, market operators said the growth recorded was partly due to the impact of market making and sustained investor confidence.Assessing the market performance, Rotimi said the impact of the numerous market development initiatives of the Securities and Exchange Commission (SEC) and the NSE on the market performance could not be over-emphasised.
“Our markets are continually being broadened and deepened with the introduction of market making (for stocks and bonds), securities lending and short selling among others. The market was further encouraged by the regulators' continued demonstration of their zero tolerance for market infractions as exemplified by the recent suspension of a leading deposit money bank from capital market activities. These actions have resonated positively with local and foreign investors,” he said.
He added that the improved investor confidence is largely responsible for the increased level of participation, in the capital markets, by local institutional investors who had hitherto remained quite tentative.
“For the first time in recent history, local institutional investors account for about two-thirds of trading volumes on the NSE”, thus reversing historical trends wherein foreign institutional investors largely dominated the market,” he said.
Future Prospects Looking ahead, the broker said the market would perform better in the second quarter given the efforts to encourage more patronage.
He said: “In terms of my outlook for the next quarter, I expect to see a significant number of corporate issuers approaching the capital markets for their long-term financing needs on the back of the strong market performance. New listings are also being expected from a number of unlisted corporates. The Alternative Securities Market (ASeM) of the NSE would attract the significant pool of growing businesses in Nigeria. The ongoing revision of rules and regulations governing market activities will give further impetus to the market. The positive impact of the revision of the investment guidelines for pension fund administrators would further boost the capital markets.”
Rotimi added that the engagements between the SEC and the Bureau of Public Enterprise (BPE) with regard to the proposed listing of the privatised power companies would be sustained and definitive agreements reached.
“On the back of these and other initiatives, the prospects for the Nigerian capital markets remain very bright,” he declared.
The Managing Director of Crane Securities Limited and former Council member of the NSE, Mr. Mike Ezeh, said considering the agenda of the board of SEC and efforts by NSE to deepen the market, more growth should be expected going forward.
“SEC has just unveiled a robust agenda to sustain the positive trend. I believe if the initiatives contained in the agenda are implemented coupled with the efforts of the NSE to boost product offerings and encourage more listings, the market would continue to do well,” Ezeh said.
SEC Agenda The new board of SEC led by former director general of the apex regulatory body, Mallam Sulleyman Ndanusa, recently unveiled its agenda for the market after meeting with various market stakeholders.
According to Ndanusa, the Board and management of the SEC are poised to deploy necessary resources and partner all stakeholders including the media, to ensure the realisation of their aspirations. He disclosed that the dream was to build a market that has a global competitive edge.
“A market that is able to meet the domestic needs of the Nigerian economy, serve as the investment hub not just of West Africa but indeed the whole of Africa while also contributing considerably to the global economy. To achieve this will be to build a market that is in tune in all respects with global standards,” he said.
He added that it was a collective responsibility to grow a market that boasts of robust product offerings; fair, efficient and transparent processes; integrity; strong and transparent disclosure and accountability regime; sound regulatory framework; investor confidence and good corporate governance.
Speaking on the agenda for 2013, the DG of SEC, Ms. Arunmah Oteh, said the thrust of commission’s regulatory and market development activities shall be innovation, financial inclusion and effectiveness.
She said: “To put these in context, the capital market remains the best source of cheap medium to long-term finance for enterprises as well as for government. The capital market mobilises savings to meet these long term financing needs in a manner that benefits the savers, the investors and the economy as a whole. In the past year, we have seen significant gains in the form of appreciation in asset prices and increasing interest among investors. The question that remains is how can we catch on the momentum to position the market to better play its role as a critical component of the national economy? The answer, to my mind, lies in evolving a market that is more innovative, inclusive and built on effective processes and structures.”
Oteh noted that the commission would key into various reform programmes in the wider economy, to attract listings in both the equity and fixed income segments of the capital markets.
Under financial inclusion, the SEC boss said it would entail financial literacy, collective investment schemes, and supporting small and medium enterprises through venture capital.
“In the area of financial literacy, we are using all channels to enhance the level of financial literacy across various segments of the Nigerian population. In the past year, and even more so going forward, our social media presence has remained and will be unmatched by any government agency in Nigeria,” Oteh said.
Regarding the collective investment scheme, she added that in 2013, SEC would build on the momentum of the past year, which saw the return of retail investor interest in the stock market.
“This year, we will continue to advocate and encourage the adoption of collective investment schemes for retail investors. Institutional investors have greater clout in corporate governance and are able to demand greater accountability on behalf of the aggregated interests of unit holders. They offer professional asset management and diversification both of which features combine to provide greater safety for retail investors,” she said.
Source: ThisDay Live