Market Update for February 19 2019
Nigeria’s stock market had a very volatile and mixed session on Tuesday as sentiments turned positive, closing higher on a strong buying interest in banking stocks. The NSE benchmark index retraced up on the impressive dividend payout by Zenith Bank that triggered demand for high-cap stocks and many stocks followed, based on high expectations that helped power the numbers higher for the day. It is expected also that political correctness after the general elections will further support the market, no matter who wins, whether the ruling All Progressives Congress, or main opposition Peoples Democratic Party (PDP).
Trading opened the day on downside in the morning, continuing from Monday, but rebounded slightly at mid-morning before pulling back by the midday to early afternoon, after which it rallied back up on earnings declaration It then touched intraday highs of 32,416.04 from its lows of 32.157.27 basis points, before finally closing the day at 32,406.18 on a low traded volume.
During the day also the NSE All Share index ran up, going into a 5-wave corrective mode that signals an imminent end of the bear-run with more corporate earnings likely to hit the market in the coming days after the February 23 polls.
Tuesday’s market technicals were positive and strong with volume traded higher than previous session’s in the midst of a positive breadth and high buying sentiment, as revealed by Daily Sentiment Report, showing a buy volume of 96% and sell position of 4%. Daily transaction volume index for the day stood at 1.02.
Momentum behind the day’s market performance was high, to reflect the increasing bargain hunting as shown by money flow index at 82.86points, from previous day’s 78.31bps, indicating that funds are entering the market and some stocks.
Index and Market Cap
The NSEASI gained 216.113bps at the end of Tuesday’s session, closing at 32,406.18bps after opening at 32,190.07bps, representing a 0.67% growth, while market capitalization climbed N80.6bn up, closing at N12.08tr, from the opening value of N12tr. This represented a 0.67% value gain.
The upturn recorded today was impacted by price appreciation of medium and large cap stocks like Unilever Nigeria, Guaranty Trust Bank, Zenith Bank, UBA, Access Bank, Diamond Bank, Oando, Dangote Sugar and Honeywell, among others. This impacted positively on Year-to-Date NSE gains which inched to 3.10%, while YTD gain in market capitalization climbed to N268.44bn from the year’s opening level of N11.72tr, representing a 3.10% growth.
Bullish Sectoral Indices
All the sectoral indices were largely bullish, except for the NSE Industrial goods. The NSE Banking index led the sectorial performance by 2.97% on expectations of full-year results from stocks in the sector as already signaled by Zenith Bank Plc on Tuesday (READ HERE), while market breadth was positive withadvancers outnumbering decliners in the ratio of 16:12.
Market activities were up in volume and value by 55.01% and 23.69% respectively to 361.82 shares worth N4.16bn, from previous day’s 233.42 units valued at N3.36bn. Transaction volume was driven by dividend paying stocks like: Transcorp, UBA, Zenith Bank and Guaranty Trust Bank.
The best performing stocks for the session were Japual Oil and Sovereign Trust Insurance which chalked 9.52% each to close at N0.23 and N0.23 respectively on market forces; while the flipside was led by First Aluminum and Transcorp after shedding N10%% and 9.74% respectively to close at N0.27 and N1.39 each, on profit booking and market forces.
The market rebounded on improved volume despite profit taking and volatility that continued as investors and traders reposition for 2019 dividend declaration season and post-election rally expected to shape market performance in the interim. We advise cautious trading and investing while positioning in fundamentally sound equities. We expect early filers like United Capital, Africa Prudential, and Forte Oil to hit the market with their numbers any moment from now.
Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on political space, but investors should review their positions in line with their investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals
By Femi Adekoya
The Commissioner in the High Commission of the United Republic of Tanzania, Muhidini Ally Mboweto, has sought the assistance of President of Dangote Group, Aliko Dangote, in the development of his country’s energy sector.
The Commissioner, who led a delegation from Tanzania High Commission and the Tanzania Petroleum Development Corporation (TPDC), on a study tour of the Dangote Refinery and Fertilizer plants to seek collaboration between Dangote Group and the Tanzanian Government in making the country self-sufficient in petroleum products said his country needs similar investment.
Specifically, the Ambassador in a statement made available to The Guardian, was said to have appealed to Aliko Dangote to replicate his huge investment in Nigeria’s cement and refinery industries into Tanzania’s petroleum refining sector.
Speaking after the tour of the Refinery and Fertiliser plants, Mboweto said Tanzania possesses vast natural resources and is endowed with unique comparative advantages thus offering exceptionally attractive opportunities to investors.
The Ambassador flaunted Tanzania’s minerals potential, which are gas, gold, diamonds, and gemstones including tanzanite, base metals and a host of other minerals, and disclosed that Tanzania has bilateral trade agreements with eight countries it shares borders with including the Indian Ocean, describing them as potential markets for investors.
He was quoted: “Tanzania has a politically stable economy; it is surrounded by eight countries and six are landlocked, so their ports depend on Tanzania. Also, we are member to East Africa Community, which include Burundi, Kenya, Rwanda, Tanzania, and Uganda. We are also part of a 16-country member with an average of 400 million people. So, when invest you in Tanzania, you are exposed to these huge potential.
“It is really worth investing in Tanzania because it will expose you to a large market. We want him (Dangote) to expand his investment in other areas of the economy. We have varieties of minerals, diamond, gold and other areas. You can invest in wildlife. We also have a lot of tourist attractions,” the High Commissioner added.
He commended Dangote for helping to reduce the price of cement in Tanzania through his massive investment in the country’s cement industry.
“Dangote Cement is already in Tanzania and the plant is doing very well. So, the Dangote cement plant has made a huge contribution to our cement demand. Now majority of people in Tanzania can access cement for their building construction,” he added.
Production Manager, Tanzania Petroleum Development Corporation, Modestus Martin Lumato, called on Aliko Dangote to partner the oil company to set up a refinery plant in the country.
He said about six countries are depending on Tanzania for petroleum products, thus the need for the collaboration between the two countries. “The Tanzanian petroleum product market is huge. We are also looking forward to buying petroleum products from Nigeria when the refinery is completed.”
Presenting the status of the refinery project, Head, Quality Assurance/Quality Control, Dangote Oil Refinery Company Limited, Rama Rao Putta, disclosed that erection of the refinery equipment has started.
He listed some of the equipment, which have arrived at the site of the Dangote Refinery to include, the RFCC Reactor Regenerator being shipped by Hyundai Heavy Industries, Propylene Recovery Unit, Penex Stabilizer, Penex Feed Surge Drum, RFCC riser, Heat Exchanger and several others.
Putta described the project as the largest single train petroleum refinery in the world with capacity to process 650,000 barrels per day of crude oil. He said the refinery will lead to the protection of forex revenue of around $16 billion a year at current market prices and saving of $10 billion a year through domestic supplies of petroleum products.
Putta said the refinery is going to create 100,000 indirect employments through retail outlets and ease availability of petroleum products in the country.
He noted that the company has completed the training of the first and second batches of Nigerian Engineers in India and that the employees were being acclimatised at site
By Helen Oji
The incidence of multiple taxes, which have crippled operations of many listed firms in Nigeria, has spawned fresh criticisms, as capital market experts at the weekend, urged the incoming administration to abolish such investment obstacle.
The experts, who canvassed a downward review of the withholding tax charged on dividend paid by quoted firms, also condemned a situation where companies that recorded losses are made to pay taxes from their turnover.
According to them, the tax system depletes returns on investment, erodes capital base of listed firms, and subsequently trigger businesses collapse.
They added that it largely undermines efforts by capital market regulators to woo more companies to list their shares in the market, a move that will make investors have access to many investment opportunities and deepen the market.
There are over 2,000 registered public companies, but less than 500 are listed on the Nigerian Stock Exchange (NSE), and this, they believe is because tax on dividend and capital gains are punitive compared to taxes on savings like bank deposits or treasury bills.
Besides, when more companies enlist, the federal government will earn more revenue in form of tax. But instead of listing and enjoying the benefits, most of them stay away from the market.
Therefore, they suggested that the incoming administration must review the tax system and multiple taxes levied on Nigerian firms to induce savings, generate high employment opportunities, and grow the nation’s Gross Domestic Product (GDP).
An independent investor, Amaechi Egbo, said: “Even though the government has in recent times moved towards a low tax regime, there is no denying the fact that current tax rates both corporate and personal are still too high to promote compliance and attract investment.
“Beyond being a disincentive to participation in the capital market, this situation has wider economic implications. The tax regime of quoted companies is an important tool for decision-making by multinationals whether to list or stay away from the market.
Egbo “further argued that government has not provided the needed infrastructure and amenities to justify the current tax regime in Nigeria.
A professor in the Department of Business Law, College of Law, Igbinedion University, Okada, Prof. Nat Ofo, said: “Multiple taxes are bad for businesses, as it unduly depletes the resources of companies, short changes shareholders by reducing the amount available to pay them dividend, and imposes inefficiency on companies.
“Government and regulators should provide an enabling environment for businesses to thrive. Multiple taxes are inconsistent with that objective, and should consequently be discouraged and discarded.”
The National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie, said: “the tax regime in Nigeria is indeed killing, what is government doing with these levies? They are not using it to better the life of the ordinary Nigerian. The infrastructure are not there; power that would enable these companies run their factory is absent, and most of these industries have no good road network, and at the end, it would affect dividend declaration and shareholders will suffer.
“The incoming government must give priority to the issues of multiple taxation, some of these companies need tax holidays in other to recoup the money invested in infrastructures so that there will be room to pay dividend to those who invested in them and employed more hands.”
The Managing Director, Highcap Securities, Imafidon Adonri, said: “Multiple taxes are a disincentive to investment; the incoming administration should abolish them.”
Agreeing, the Publicity Secretary, Independence Shareholders Association, Moses Igbrude, said not only is multiple taxes a disincentive, but also a big challenge to businesses. “This heavy tax burden ranges from FIRS, SIRS, and local governments, even thugs move around business premises collecting different levies and fines from companies, their customers and suppliers.
“All this payments hit the bottom line, making shareholders to go home without dividend at the end of every year. This is discouraging and hinders the growth of businesses in Nigeria
By The Nation,
Sterling Bank Plc yesterday listed its N32.9 billion bond on the Nigerian Stock Exchange (NGSE) and FMDQ OTC Securities Exchange, paving the way for investors in the bond to trade on their units.
The N32.90 billion Series 2 bond, issued by Sterling Investment Management SPV Plc, a special purpose vehicle of the bank, is an unsecured bond with a tenor of seven years at a fixed coupon rate of 16.50 per cent. The bond is part of a N65 billion debt issuance programme launched by Sterling Bank to support its new business strategy and digital banking.
Under the new business strategy, Sterling Bank will build expertise and investments in five sectors regarded as growth sectors of the Nigerian economy including health, education, agriculture, renewable energy and transportation.
Speaking during the listing at the NGSE and FMDQ, Managing Director, Sterling Bank Plc, Mr. Abubakar Suleiman, said the success of the bond reflected the increasing appetite of local institutional investors for long term debt instruments and increasing confidence in Sterling Bank as an issuer.
According to him, the considerable oversubscription of the issue showed investors’ confidence in the bank and further strengthened and diversified the bank’s corporate funding strategy.
He commended stockbrokers for supporting the bank and assured that the bank will continue to engage the market on its activities. He urged capital market operators to continue to support the bank as it continues to explore opportunities to widen its businesses and strengthen is balance sheet.
Associate Executive Director, Capital Markets, FMDQ OTC Securities Exchange, Ms. Tumi Sekoni commended Sterling Bank for again joining the league of corporate entities whose debt profiles have been raised through the value-packed listings, quotations and noting service offered by FMDQ. Sterling Bank had listed its earlier bond on FMDQ.
She noted that the listing would contribute to the growth of the Nigerian corporate bond market by injecting renewed confidence into the debt market. She assured stakeholders that FMDQ would continue to innovate and provide efficient services, as may be necessary, to support issuers and investors, towards achieving a globally competitive and operationally excellent debt market.
Partner and Head of Investment Banking, Constant Capital Partners Limited, Mr. Niyi Omojola noted that his firm, the lead issuing house in the bond issue, crafted a unique and innovative investment structure which enabled the Sterling SPV bond share in the same investment grade rating as Sterling Bank Plc, thereby enlarging the range of potential investors in the bond. He said the innovative structure protects investors by providing bond-backed credit enhancement while investing in the Tier II capital of Sterling Bank Plc. According to him, as a result of the compelling proposition offered by Sterling Bank Plc and the structuring and distribution efforts of Constant Capital, the transaction was extensively oversubscribed. Omojola also said the innovation has allowed investors benefit from an enhanced rating, while providing Tier II capital to Sterling Bank Plc.
Associate Executive Director, Corporate Development, FMDQ OTC Securities Exchange, Ms. Kaodi Ugoji, said listing on FMDQ will avail the bond unprecedented market transparency, unrivalled information disclosure, efficient price formation and improved global visibility, among other benefits. She reiterated FMDQ’s commitment to continually align its initiatives towards serving and providing the much-needed support to the players in the DCM.
By Taofik Salako – The Nation,
Authorities at the Nigerian Stock Exchange (NGSE) will this weekend launch a new trading platform for collective investment schemes (CIS), otherwise known as mutual funds.
The platform is expected to facilitate electronic transactions with seamless connection among key parties in transactions, including the Exchange, Central Securities Clearing System (CSCS), stockbrokers and fund managers.
The NGSE said the new platform aims to improve and enhance access of listed mutual funds to investors. “The overarching goal is to enhance visibility for the listed funds and promote financial inclusion, while stimulating retail investor participation in our market,” the NGSE said. The new platform is also expected to engender listing of more mutual funds at the Exchange.
The Nigerian mutual fund industry is a growing market as fund managers continue to float new funds to provide alternative investment windows for the investing public. Official report by the Securities and Exchange Commission (SEC) showed that there were some 74 registered mutual funds in Nigeria with total net asset value (NAV) of about N552 billion as at April 20, 2018. There are 47 mutual funds listed on the Memorandum Quotation of the NSE.
A mutual fund is a pool of funds brought together by a professional fund manager from several investors to invest in selected underlying securities. The underlying securities can be one or a combination of the following: stocks, fixed income securities, real estate and commodities. A mutual fund portfolio is structured and maintained to match different investment objectives. The type of mutual fund an individual invests in depends on their financial objectives and appetite for risk.
As professionally-managed joint investment vehicles through which investors can pool funds and invest in chosen basket of securities, mutual funds have proven to be a veritable means to optimise returns and reduce risks. With track records of above-average returns and stable performance, mutual funds provide common window for all cadres of investors-high and low networth, to invest in the various segments of the Nigerian economy and earn competitive returns.
Most mutual funds are open-ended investment schemes. This means that the fund manager can create additional units for new investors on demand. The fund manager is also able to provide active liquidity by redeeming units from existing investors who want to sell units for cash. Through this pool of funds, an investor creates wealth over a long period of time by making the money work for him through regular saving and investment.
In addition to liquidity, mutual funds offer a range of benefits to investors, including portfolio diversification and lower transaction costs. The existence of a Trustee and Custodian to a mutual fund ensures the safety of investments, as the Trustee ensures that the fund is managed in line with approved investment guidelines, and the Custodian holds the fund assets.
Mutual fund investments are affordable for low-income investors, as some funds require an initial investment of only N5,000. The mutual fund assets in Nigeria have grown significantly in the last five years. This is an indication of the growing interest in this class of investment.
Data from SEC on the Net Asset Value (NAV) of all registered mutual funds in Nigeria showed that the collective NAV grew by 349 per cent between November 01, 2013 and November 02, 2018. This translated to a Compound Annual Growth Rate (CAGR) of 35 per cent during the period.
However, participation in the Nigerian mutual fund industry has been low, partly due to generally low level of investor education and awareness and particularly, the absence of good understanding and awareness about the mutual fund industry.