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Panic-Stricken Investors Dump Shares on Profit Warnings

WEEKLY REPORT

By Goddy Egene and Eromosele Abiodun

The negative investor sentiment on the back of profit-warning announcement by Ecobank Transnational Incorporated (ETI) Plc and the rush by investors to take profit on recent gains on some positive earnings released, dragged the equities market southwards last week.

GTBank Plc, the United Bank for Africa Plc, Zenith Bank Plc and Access Bank Plc all released their audited results for 2015, showing improved profitability. However, the ETI sent a profit warning to the market. This led to negative reactions by some investors. The stock ended the week with a decline of 20 per cent as investors dumped the shares.

Generally, The market was volatile in four days of the week as panic stricken investors’ dumped shares while others maintained a wait-and-see approach.

The market recorded a marginal gain on Thursday and Friday helped by positive earnings released by Nestle Nigeria Plc.

But the gains recorded on Thursday and Friday were not enough to reverse the losses of the previous days. Consequently, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) and market capitalisation depreciated by 1.13 per cent to close the week at 25,694.79 and N8.839 trillion respectively.

Similarly, all other indices finished lower during the week, with the exception of the NSE Premium Index and the NSE Consumer Goods Index that increased by 0.89 per cent, and 0.78 per cent respectively

Meanwhile, analysts believe earnings release as well as attractive dividend yield may continue to support the market in immediate term.

“We expect hope of positive earnings release as well as attractive dividend yield to continue to support the market in immediate term. However, we advise investor to embrace a medium to longer term investment horizon as market will still be volatile post corporate earnings announcement on account of weak macro fundamentals, highlighted by the softening oil prices and pegged exchanged rate regime which has kept foreign portfolio investors on the side-line,” said analysts at InvestmentOne Limited.

Daily Performance Analysis

Trading resumed on Monday on a negative note, falling 0.52 per cent134.82 points to 25,853.58 points. The decline was driven by sell offs in Dangote Cement Plc (1.22 per cent), Nigerian Breweries Plc (3.00 per cent) and Lafarge Africa Plc (1.70 per cent) offsetting gains posted by Zenith Bank Plc (4.45 per cent), Guaranty Trust Bank Plc (2.22 per cent), FBN Holdings Plc (2.71 per cent) and Access Bank Plc (1.81 per cent). Guaranty Trust Bank Plc’s performance was spurred by the release of its full year results on the day, which showed a 3.7 per cent y/y rise in PBT to N120.69 billion, and a proposed final dividend of N1.52 kobo. Banking and Oil and Gas sectors rose 1.17 per cent and 0.21 per cent respectively against consumer and Industrial tickers which both shed 1.35 per cent and 1.32 per cent respectively.

Negative sentiments on the back of more profit warnings dragged the index to a negative close on Tuesday shedding 0.42 per cent to end at 25,738.25 points corresponding to market capitalisation of N8.8 trillion. This happened despite impressive scorecard from UBA Plc, and could be largely blamed on losses recorded in ETI Plc, Guaranty Trust Bank Plc and Oando Plc, which outweighed gains in Dangote Cement Plc, UBA Plc and Julius Berger Nigeria Plc. Activity level was on the increase with volume and value of trade rising by 64 per cent and 90 per cent respectively to end the session at about 287 million and N2.67 billion each. In line with the general negative sentiment prevailing in the market, performance of major sub-sector indices worsened.

Investor sentiment remained negative on Wednesday as the Nigerian equities market shed 0.34 per cent to close at 25,657.48 points. This was driven by the continued sell off in ETI (4.98 per cent), after its FY 2015 profit warning on the day, and Zenith Bank Plc (3.74 per cent), despite the company announcing a N1.55 kobo final dividend after market close the prior day. Nestle Nigeria Plc (1.45 per cent), which announced a 20 per cent y/y increase in PBT in its FY 2015 results on the day, Oando Plc (9.54 per cent) and UBA also contributed to this outcome, offsetting Nigerian Breweries Plc (3.28 per cent), Guaranty Trust Bank Plc (1.23 per cent) and Dangote Sugar Plc (4.99 per cent).

The market closed flat on Thursday with a marginal appreciation. The NSE ASI rose by 0.08 per cent to 25,679.03 points. The appreciation recorded in the share prices of Dangote Cement Plc, Nigerian Breweries Plc, Transcorp Plc, UBA Plc and Skye Bank Plc were mainly responsible for the gain recorded in the ASI. Similarly, the market capitalisation appreciated by 0.08 per cent to close at N8.833 trillion. The total value of stocks traded on the floors of the NSE on the day was N7.68 billion, up by 63.85 per cent from N4.69 billion traded the prior day.

The NSE All Share Index recorded a marginal gain last Friday as positive sentiments from newly released company results waned. The NSE ASI rose by 0.06 per cent to 25,694.79 points. The appreciation recorded in the share prices of Unilever Nigeria Plc, Nigerian Breweries Plc, FBN Holdings Plc, UBA Plc and Zenith Bank Plc were mainly responsible for the gain recorded in the Index. Similarly, the market capitalisation appreciated marginally by 0.06 per cent to close at N8.84 trillion, compared with the marginal appreciation of 0.08 per cent recorded the prior day to close at N8.83 trillion. The total value of stocks traded on the floors of the NSE last Friday was N1.89 billion, down by 75.35 per cent from N7.68 billion traded the previous day.

Market Turnover

Meanwhile, the value and volume of trading soared to 11.907 billion shares worth N18.338 billion in 19,508 deals, from 1.111 billion shares valued at N7.448 billion that exchanged hands the previous week in 15,562 deals.

The Financial Services Industry led the activity chart with 11.692 billion shares valued at N14.734 billion traded in 13,094 deals, thus contributing 98.20 per cent and 80.35 per cent to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with 71.891 million shares worth N175.603 million in 777 deals. The third place was occupied by the Consumer Goods Industry with a turnover of 69.718 million shares worth N1.179 billion in 3,019 deals.

Trading in the top three equities namely-Wema Bank Plc, Unity Kapital Assurance Plc and Zenith Bank accounted for 11.006 billion shares worth N11.274 billion in 2,856 deals, contributing 92.43 per cent and 61.48 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 294,047 units of Exchange Traded Products (ETPs) valued at N3.209 million executed in 42 deals, compared with a total of 72,054 units valued at N637,635.25 transacted the prior week in 26 deals.

A total of 12,470 units of Federal Government Bonds valued at N14.348 million were traded in 8 deals last week. However, there were no transactions recorded on bonds last week.

Gainers and Losers

A total of 20 equities appreciated in price during the week, lower than 39 equities of the previous week. Forty-one equities depreciated in price, higher than 22 equities of the previous week, while 128 equities remained unchanged same as previous week.

Nigerian Breweries Plc led the price gainers with N5.00, followed by Conoil Plc with N3.54. Others top gainers included: Okomu Oil Palm Plc (N1.57), Unilever Nigeria Plc (N1.39), UBA Plc (33 kobo), Tiger Branded Consumer Goods Plc (16 kobo), Champion Breweries Plc (24 kobo), Law Union and Rock Plc, Learn Africa ( six kobo apiece) and Neimeth Plc ( three kobo).

Contrary, the top 10 losers included: Seven-Up Bottling Company Plc (N9.91), ETI Plc (N3.65), Oando Plc (N1.35), Access Bank Plc (47 kobo), E-Transact Plc (29 kobo), Ikeja Hotel Plc (25 kobo), Honeywell Plc (18 kobo), Diamond Bank (12 kobo), Transnational Corporation Plc (8 kobo) and Wema Bank Plc (seven kobo).

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