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Stock Exchange records over ₦86 billion loss in October

Trading activities at the Nigerian Stock Exchange in the month of October were characterised by losses as market indicators continued their bearish trend.

Over N86 billion was lost during the month with the market capitalisation closing at N5.144 trillion on the last trading day of the month, after it opened on the first day at N5.230 trillion. The market capitalisation rose to N5.435 trillion in the second week before dipping due to the slow pace of activities witnessed in all sectors quoted at the exchange.

The Exchange's All-Share Index which opened at the beginning of month with 22,497.27 basis points declined by 3.08 per cent or 692.58 units to close at 21,804.69. Also, two of the four stock exchange sectoral indices depreciated at the end of October - the Banking Index lost 4.05 per cent while the Insurance Index lost 4.74 per cent. However, the Food/Beverages Index gained 5.13 per cent at the end of the month while the Oil/Gas Index was up 7.65 per cent.

Investors shy away

Analysts have attributed the low turnover recorded during the period in review to the ongoing reforms in the banking sector.

Tunde Oladapo, chief executive officer of StockPicks Consulting Limited, said "Real investors (long term investors) are shying away from the market presently. They are holding on to cash. But generally, if you compare the volume of stocks being offloaded on the floor of the exchange now with the previous months, it's obvious that investors' confidence is building up gradually even though it's on a slow pace and may not be absolute any time soon."

However, Mr. Oladapo believes the capital market will stabilise from next year, because "the Central Bank of Nigeria has done its worst". He forecasts an oscillating market in the remaining two months, saying, "Fund managers will be buying and selling. No significant rebound will happen until next year."

Effect of suspension

In the aftermath of the newly released stress audit result by the Central Bank on October 2, which showed that four additional banks were in a "grave situation," the management of the stock exchange, on October 5, placed a one-week technical suspension on the shares of BankPHB and Springbank while it took no action on Wema Bank. The fourth bank, Equitorial Trust Bank, is not a publicly quoted company, therefore, the stock exchange could not take any action on it.

The technical suspension, which means that trading will be allowed on the stocks but their prices cannot move up or down, was aimed at restricting the dumping of the shares of those banks to avoid a free fall on their prices.

However, the one-week suspension still affected the performance of the banking sector, a major driver of the exchange's turnover volume, forcing it to decline to 1.45 billion shares from 2.02 billion recorded before the action. But, in spite of the crisis in the banking sector, it maintained its position as the most active in terms of volume.

Though the suspension was lifted on October 13, the share prices of BankPHB and Springbank have continued to decline by 35 and 47 per cent respectively since then. On the contrary, the shares of the two other "troubled" banks - Wema Bank and Unity Bank - have retained their prices.

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