Shareholders lose N325bn in banking sector

Despite the impressive half year results released by some banks, shareholders in the banking sector recorded a loss of about N325 billion in the month of July 2015. This follows a sell pressure that have persisted in the equity market. The volatile political and macroeconomic environment that has characterised the current financial year has taken its toll on the stock market, reducing shareholders’ investment value and raising concerns that investors’ apathy in the nation’s bourse might increase. The market capitalisation of the Nigerian Stock Exchange (NSE), which gauges the value of listed stocks, stood at N10.344 trillion at the close of trading on July 31 as against the opening figure of N11.421 trillion recorded at the close of trading on June 30, accounting for a loss of N1.077 trillion or 9.42 per cent. Checks by New Telegraph showed that the banking subsector recorded a drop of N325 billion during the period under review. Managing Director, Financial Derivative Company, Mr. Bismark Rewane, had said that the absence of a firm policy direction makes investors jittery, adding that the market remains bearish as investors seek shelter in alternative asset classes.

According to him, annual results released in June by quoted companies showed mixed performance. He noted that stock market may dip further following disappointing H1 earnings. Rewane said that stocks were set to find new bottoms when floor price removal becomes effective – the one kobo rule – adding that market turnover will increase after the policy becomes effective in August. He noted also that foreign portfolio reversals were imminent as Federal Reserve is set to increase interest rates.

Rewane who was optimistic that political stability in the country will attract foreign investment, which will add liquidity in the market, noted that the market remained quiet in the month of July as it awaited Q2 corporate announcements. Rewane had recently noted that the current downturn in the nation’s capital market might be sustained, adding that this became necessary following challenging economic outlook, which has continued to fuel negative sentiments on the capital market, given the huge drop in oil prices. Foreign Portfolio Investment (FPI) transactions at the nation’s bourse had decreased to N69.65 billion, down 12.69 per cent from May 2015 while Domestic transactions increased to N133.80 billion in the same period, representing an upward movement of 103.71 per cent. In a report obtained from the NSE website, foreign investors conceded about 31.52 per cent of trading to domestic investors as FPI transactions decreased from 54.84 per cent of the total transactions in May to 34.24 per cent in June while domestic transactions increased from 45.16 per cent to 65.76 per cent over the same period.