New trading engine to prolong stock market decline – Report

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BY NKIRUKA NNOROM

The introduction of the new trading engine, X-Gen, by the Nigerian Stock Exchange, NSE, will likely prolong the current downturn in the stock market in the last quarter of the year, said analysts at BGL Securities Limited.

In its review of capital market activities for nine months to September, 2013 and outlook for fourth quarter and 2014, the equity research firm said, “A number of key developments in the stock market in recent times worthy of note include the September 30th migration of the NSE trading platform to the X-Gen platform, a modern and robust trading platform with multifunctional capabilities.

“The platform is set to change the structure of transaction in the market as it allows order automation, multiple channels interaction and real time integration of stockbrokers’ web access to the market such that investors can see and may be trade directly through their brokers’ platform real time.”

However, “The learning curve for brokers on the use of the newly installed X-Gen trading platform is expected to contribute to the current drag in the performance of the stock market in the last quarter of the year,” BGL affirmed.

In the report titled, “Economic Note: The Nigerian Capital Market in the First Three Quarters of 2013”, BGL team said the market is consequently expected to close with about 30 percent performance.

Giving further analysis of activities in the market, it said the sub-national bond space may remain flat for the rest of the year and the first quarter of 2014, while the second phase of power companies’ sales would increase loan syndication in the market.

The company noted in the report that the primary market window is probably getting rejuvenated with an estimated N125.2 billion raised by different listed companies through that window, adding that the success recorded by most of the companies would encourage more companies to come to the market for public offers in the near term.

It said, “For the first nine months of the year 2013, the Nigerian Capital Market enjoyed some impressive rally. The rally experienced could be tied around factors such as the rub off effect of 2012 year end, impressive valuation of blue chip companies, growing investor confidence and significant increase in foreign inflow into the market.

Further underscoring how attractive the market has been so far in the year, the return of the equities market peaked at 40 percent in June, while the implied market to market yield on the 10-year bond reached a 2-year low of 10.5 percent earlier in the year.”

Continuing, the report said, “The performance of the Nigerian bourse so far in 2013 has been very impressive despite the price corrections experienced at some point. In the earlier part of the year, the market extended bullish trend of late 2012 with a peak to date return of 40.1 percent on June 11, while the NSE All Share Index and market capitalisation reached five-year highs of 40,012.66 points and N12.8 trillion respectively.

“There was, however, reversal of the market rally from the 12th of June as the NSE ASI fell daily consecutively until it got to as low as 35,832.16 points on the 1st of July. The factors attributable to this include profit taking and perhaps portfolio re-allocation to relative more attractive fixed income instruments by investors and later the announcement by the US Fed of a possibility to commence tapering of it quantitative easing policy. The market has since corrected to around 28 percent gain as at the end of September.”

 

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