Investors lose N785bn in five blue chip firms

Activities on the Nigerian Stock Exchange (NSE), which had been bearish, have resulted in a loss of about N784.8 billion by shareholders of five most capitalised companies between May and July 16 (two and half months). The market capitalisation of the Exchange, which measures the value of stocks listed, stood at N10.627 trillion at the close of trading last Thursday. This is against N11.786 trillion recorded on April 30, leading to overall investment value depreciating by N1.159 trillion.

The highly capitalised stocks that lost N784.8 billion during the period under review are Dangote Cement Plc, Nestle Nigeria Plc, Nigerian Breweries Plc, Guaranty Trust Bank Plc and Zenith Bank Plc. Checks by New Telegraph showed that Dangote Cement, which controls about 28 per cent of overall market capitalisation, led the top five league with a loss of N281 billion or 8.9 per cent to close at N2.862 trillion on July 16 as against N3.143 trillion recorded at the end of April. Nigerian Breweries Plc followed with a drop of N228 billion or 18.32 per cent to close from N1.244 trillion in April to N1.016 trillion last Thursday.

Zenith Bank Plc depreciated by N107.7 billion or 16.21 per cent, from N664.03 billion to N556.3 billion, while Nestle Nigeria Plc declined by N87.2 billion or 11.57 per cent to close at N665.8 billion at the time of filing this report last Monday from N753.02 billion on April 30. Guaranty Trust Bank Plc fell by N80.9 billion or 9.56 per cent, from N846.1 billion to N765.2 billion during the period under review.

Last Thursday, Nigerian stocks posted a seventh consecutive weekly loss, the longest streak since September 2011, as investors anticipating a devaluation of the naira continue to shy away from the country’s assets. The low sentiment in the market has been on the increase as momentum remains with the bears. Financial analysts attribute the ongoing lull in the market to pulling out of foreign investors who make up about 50 per cent of participants in the stock market since they know that the Nigerian economy significantly depends on oil revenue and they expect the economy to weaken due to the drop in the price of crude oil from $115 per barrel in June 2014 to about $57 per barrel. A stockbroker, Mr. Aruna Kebira, said that the fluctuation in the market is a temporary phenomenon that will correct itself on the long run, as investors regain confidence in the market and the sell down eases.

However, analysts at United Capital Plc expect investors to stay cautious and carefully monitor market movements with the Monetary Policy Committee (MPC) meeting due later this week, as the meeting’s outcome will likely play a key role in shaping market direction over the near term. The Managing Director, Cowry Asset Management Limited, Mr. Jonson Chukwu, also attributed the decline in the country’s foreign reserve as a major factor that is making capital market less attractive to investors. He linked the sustainable bear run in the equities market that has led to a considerable drop in value of equities in market capitalisation year to date to decline in foreign reserve. Chukwu noted that external reserve remains a cardinal barometer for assessing the financial risk of an economy, which was usually the first point of call for foreign portfolio investors in either the equities sector or in the debt instruments.