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‘Political stability will stimulate equity market'

By 234next 31/05/2011 21:39:00

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‘Political stability will stimulate equity market'

Some market operators have said that despite the unstable market performance being experienced currently at the Nigerian Stock Exchange (NSE), a good business environment sustained by political stability would boost investors' confidence at the equity market.

Analysts at GTI Capital, a stock broking firm, said although there will be an "increased appetite for cash and money market instruments" because of the new interest rate announced recently by the nation's Monetary Policy Committee (MPC), "the likely increase in foreign direct investment and private investments given a friendly business environment buoy by political stability will modestly stimulate equity market."

The MPC last week raised its benchmark interest rate by 50 basis points to 8 per cent, in an effort to curb inflation and reduce pressure on the local currency.

Commenting on last week's trading performance, analysts at Proshare Nigeria Limited, an investment advisory firm, said the downtrend witnessed in the market "could be described as short-term market correction on the back of profit taking," adding that the market sentiment however closed positive, as against the negative outlook recorded in the previous week.

Low turnover

The Exchange recorded a low turnover of 1.326 billion shares worth N10.2 billion last week, in contrast to a total of 2.316 billion shares valued at N13.68 billion exchanged in the previous week.

The NSE market capitalisation of the 194 First-Tier equities appreciated in value at the end of trading last week by N18 billion or 0.2 per cent, to close at N8.258 trillion from the preceding week's figures of N8.240 trillion.

The NSE All-Share Index in the week also gained 0.2 per cent or 39.11 units to close at 25,829.75 basis points from the 25,790.64 recorded the previous week.

In terms of turnover volume, the Banking subsector was the most active during the week with 624.08 million shares worth N4.94 billion exchanged by investors.

Volume in the Banking subsector was largely driven by activity in the shares of Zenith Bank, First Bank, Guaranty Trust, and Access Bank.

Trading in the shares of the four banks accounted for 269.31 million shares, representing 43.15 per cent of the subsector's turnover during the week.

The Hotel & Tourism subsector, boosted by activity in the shares of Tourist Company of Nigeria, followed on the week's activity chart with a subsector turnover of 170.97 million shares valued at N765.34 million.

Trading on Tourist Company of Nigeria accounted for 98.26 per cent of the subsector.

Higher gainers

The number of gainers last week closed higher at 31 stocks, compared with the 28 stocks recorded in the previous week. Guinness Nigeria topped the gainers chart for the week with 9.1 per cent appreciations or N21 to close at N251 per share; while Julius Berger Nigeria followed with a gain of 12.2 per cent or N6.38 to close at N58.49 per share.

On the losers' side, a total of 52 stocks recorded price decline in the week lower than the 54 stocks recorded in the preceding week. Oando led on the price losers' table, shedding 3.7 per cent or N2 to close at N52 per share; while UAC Nigeria followed with a loss of N1.94 or 4.8 per cent to close at N38.11 per share.

The management of the NSE adjusted the prices of three equities last week for dividend as recommended by the companies' board of directors. Custodian & Allied Insurance was adjusted for dividend of 17 kobo per share; UAC Nigeria adjusted for dividend of N1.10 per share while BOC Gases was adjusted for dividend of 36 kobo per share.

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