Nigeria: Banking Stocks, FMCGs' Gains Sustain Market Rally

Investors in the Nigerian equities market again smiled home last week as the market sustained its stellar performance, riding on the back of a huge buy interest fuelled by the enthusiasm that trailed the 2012 full year results of more companies and United Bank for Africa Plc.

Specifically, the banking stocks witnessed significant price gains mid-week as speculative investors and securities traders positively responded to the news that the Central Bank of Nigeria (CBN) may have relaxed the policy initially barring the Nigerian banks from funding their offshore branches in other African countries with their locally mobilised funds.

Analysts believe the relaxation of this policy may allow the banks to strengthen their African subsidiaries and be better positioned to harness opportunities in the respective countries of location. Indeed, the successful operations of the offshore branches would have significant impacts on the banks' overall profitability.

The market had the previous week witnessed significant gains driven largely by the heavy purchase activities in UAC of Nigeria Plc and Dangote Cement as both stocks enjoyed investors' positive reactions following their impressive financial results and UACN's corporate action. Consequently, the market had touched a new year and 52-week high.

Trading had resumed last Monday on a negative note as the market struggle for directions in the new week. At the close of business for the day, stock prices fell as investors and traders could not sustain the rally momentum witnessed on the local bourse in the preceding week. Also, the decline witnessed in the banking stocks weighed on the market causing the snap in the market's gain movements. Stock prices again fell on Tuesday, extending the losses of previous trading day as investors' sell actions on high-capped stocks further pulled the market southward.

However, the market returned northward on Wednesday as stock prices rose, paring the losses of previous trading days as investors expressed overwhelming buy interests for blue chips stocks notably the banking stocks(the banking stocks remain investors' safe bets especially for speculative activities as they are the most liquid).

Besides, most of the banks posted impressive 2012 full year results that increased investors' confidence in the subsector.

The market continued on that note Thursday, sustaining the gain momentum albeit at a lesser pace as investors swap their buy interests for the less volatile consumer goods sector. But the banking subsector which was the main mover of the market in the previous trading day witnessed a bend as investors locked in their profits on the winning stocks.

Stock prices on the exchange rose again at the close of trading for the week last Friday, extending the gaining streak of the previous trading days as speculative investors and securities traders rekindled their buy interests for the cherry stocks following the earnings release of UBA Plc. However, the positive reactions of investors extended to other stocks as all NSE sector indices sustained an upward trend.

As a result, the NSE All-Share Index gained 900.95 basis points or 2.57 per cent to close at 36,010.28 while the market capitalisation equally advanced by 2.57per cent to close at N11.513 trillion. The NSE 30 Index appreciated by 49.18 points or 2.95per cent to close at 1,717.85.

All except one of the NSE sectoral indices also appreciated during the week: NSE Consumer Goods, NSE Banking, NSE Insurance, NSE Oil and Gas, NSE-Lotus II and NSE Industrial Goods by 6.14per cent, 4.53per cent, 2.69per cent, 3.72per cent, 2.72per cent, and 1.14per cent. However, NSE-ASeM Index declined by 0.73per cent.

Market Turnover
Meanwhile, analysis of trading numbers for the week under review showed that a turnover of 1.686 billion shares valued at N21.389 billion in 28,392 deals were traded last week by investors in contrast with a total of 1.511 billion shares valued at N15.867 billion that exchanged hands the previous week in 20,965 deals.

The top equity sector was led by the Financial Services (measured by volume) with a turnover of 1.313 billion shares valued at N12.173 billion traded in 15,796 deals. The Consumer Goods sector (measured by volume) followed in the top three activity chart with 98.179 million shares valued at N4.850 billion traded in 5,151 deals. Thirdly, the Oil and Gas sector joined the top activity chart with a volume of 67.246 million shares valued at N365.645 million in 1,810 deals. The top three equity sectors represented by 87.67 per cent and 81.30 per cent of the total equity volume and value traded respectively.

The banking subsector of the Financial Services sector, boosted by activity in the shares of First City Monument Bank Plc, Access Bank Plc and UBA Plc was the most active during the week (measured by volume) with a subsector turnover of 917.182 million shares worth N8.526 billion traded in 11,236 deals.

The Other Financial Institutions subsector also of the Financial Services sector followed on the week's activity chart with a subsector turnover of 192,096 million shares valued at N3.398 billion in 3,763 deals. Volume in the Other Financial Institutions subsector was largely driven by activity in the shares of FBN Holdings Plc which accounted for 167.806 million shares, representing 87.36 per cent of the turnover recorded by the subsector.

Also traded during the week were 58 units of NewGold Exchange Traded Funds (ETFs) valued at N130,231 which were executed in 3 deals compared with a total of 1,887 units valued at N4.182 million transacted last week in 4 deals.

In addition, 200 units of FGN bonds valued at N23,742 were traded during the week in 2 deals in contrast to 300 units valued at N65,520 transacted last week in 3 deals.

Gainers and Losers
The price movement chart of the NSE displayed a total of 51 equities that appreciated in prices during the week higher than 43 price gainers of the preceding week. Twenty-seven equities depreciated in price higher than 25 equities of the preceding week, while 118 equities remained constant lower than 128 equities of the preceding week. Other to 10 gainers were: CAP Plc (N12.50), Cadbury Nigeria Plc (N8.92), National Salt Company Nigeria Plc (N1.82), Airline Services and Logistics Plc (N1.38), UBA Plc (N1.10), Diamond Bank Plc (N0.98), Cutix Plc (N0.65), Africa Prudential Registrars Plc (N0.36), Courteville Business Solutions Plc (N0.11) and ABC Transport Plc (N0.25). The top 10 losers were: Costain (WA) Plc (N0.27), Paints and Coating Manufactures Plc (N0.41 ), Ikeja Hotel Plc (N0.15 ), Wema Bank Plc (N0.17), WAPIC Insurance Plc (N0.12), Milti-Trex Integrated Foods Plc (N0.06) Juli Plc (N0.26 ), Academy Press Plc (N0.18), Learn Africa Plc (N0.21) and C&I Leasing Plc (N0.05).

Analysts' Views
Meanwhile, analysts at BGL Limited believe the trading week was largely sustained by the impressive earnings releases of companies notably in the banking and consumer goods subsectors.
"In the consumer subsector, both UACN and Dangote Sugar Plc excited the investors with their impressive first quarter unaudited results for 2013. With the posted figures, we can anticipate that some companies will even do better by the end of 2013. Already, Zenith Bank and few other companies are already showing signs that their 2013 full year results will outperform the 2012 performance.

"We expect the market to continue bullish into the next trading week as investors fully react to the earnings release of UBA Plc through active buy actions. Institutional investors like the PFAs, and Insurance companies are likely to buy the stock to pick up the bank's proposed dividend of 50 kobo on each share. This investment action is expected to drive trading activities thus sustaining the gain momentum on the local bourse."

On their part, analysts at FSDH Merchant Bank Limited noted that given the current prices in the market, there may be some level of profit taking this week.

"We urge investors to consider stocks with solid fundamentals, some of which have been listed hereunder, as they prove capable of generating good returns in the medium to long- term," they said.

Source: ThisDay