Stability returns to stock market

There are indications that stability is returning to the stock market after a protracted domination of bears in the past few weeks as more stocks experienced price appreciation.

Although, analysts are of the view that the market remained weak in momentum, the market outlook at the end of last week portends the gradual return of stability as evidenced by the increase in the basis points of All Share Index as well as the continual reduction in the number of losers.

Reasons for the return of the bulls have also been mixed because of the coincidence in market recovery with the suspension of recapitalisation of capital market operators by the Securities and Exchange Commission (SEC).

Indeed, the bulls had staged a comeback on Thursday, a day after the decision by the SEC to suspend the recapitalisation exercise, prompting some market watchers to affirm that majority of the stockbrokers were actually overwhelmed by the need to source the N1 billion hitherto stipulated as minimum capital base for stockbrokers before December 31, 2008.

It was gathered that SEC’s reluctance to shift ground and the withdrawal of margin loans by the banks took a toll on the position of some stock broking firms who had to sell shares in their portfolios in order to meet the deadline.

One of the operators volunteered that, “stockbrokers do not have other assets apart from the shares they buy into their box, they contributed to the market downturn when they began to sell off these shares in order to meet the N1 billion capital base, but now that the decision has been suspended, things are beginning to look up because there is hope that they would remain in business”

At the close of trading on Friday, the Nigerian Stock Exchange (NSE) all share index increased by 205 basis points to close at 53,910.37 and market capitalisation inched up N234 billion from the previous day’s N10.482 trillion to N10.716 trillion.

Although, there is also an increase in the number of stocks closing flat, analysts noted that “it is too early to predict when the market will bottom out or reverse.”

The downward trend of the market had persisted in the past three months with the market capitalisation dropping further to N10.416 trillion and all share index of 53,366.53 points on Wednesday, June 25. On Thursday, June 26, 2008, the market was sort of re-jigged by new developments. Therefore, capitalisation moved to N10.4 trillion and all share index of 53,705.30 basis points.

This also had tremendous impact on the number of gainers on the price movement table as at Thursday, June 26 when 40 listed stocks made it to the gainer’s chart as against the 23 that gained on June 24. The tempo continued on Friday, June 27 with 66 listed stocks comprising mostly the blue chips appearing on the gainer’s table.

Akamobi ECM, managing director, Star Insurance Brokers Limited, said that the recapitalisation in the stock-broking firms forced the traders to chase every kobo that comes their way with the intention of adding to their funds for capitalisation.

He said that most of the stockbrokers have started buying stocks on the exchange resulting in the increase in the volume of transaction on daily basis.

For the first time in the week, banking sector stocks lifted the activities in the market, as Intercontinental Bank plc traded over 193 million units (representing over 30 percent of volume traded in the banking sector); though a huge proportion of the total volume traded was cross deals. Similarly, Investment and Allied Insurance plc (IAA) lifted the activities in the insurance sector, as it traded over 103 million units representing over 40 percent of volume traded in the insurance sector for the day.

C&I Leasing plc Friday released its audited full year result for the period ended January 31, 2008. Gross Earning grew by 64.78 percent to N2.658 billion, from N1.613 billion; PBT grew by 165.7 percent to N437.645 million, from N164.737 million, Profit Ater Tax also grew by 9.79 percent to N375.363 million, from N341.887 million, in the corresponding period of 2007. The company also proposed final dividend of six kobo. This result did not have positive impact on investors as the stock closed strongly on offer of over five million units.

Index was up by 64 basis points on 17,112 trades. Average size of trade was $8,664.67 with total value of $148.27 million. Market capitalisation closed at $89.87 billion.

Overall, there were 40 gainers and 58 losers and 55 unchanged. The banking sector led the volume chart followed by the insurance sector and both accounted for 89.97 percent of total volume traded.

Intercontinental Bank plc traded 193.70 million shares to top the overall volume chart. Other stocks that closed in the top echelon were Bank PHB, Investment and Allied Insurance, FCMB and Fidelity Bank plc.- BusineesDay.