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EQUITIES Profit-taking, fluctuation of equity prices to persist

By Babajide Komolafe
The fluctuating trend of equity prices is expected to continue in the Nigerian Stock Exchange (NSE) this week.
This is due to profit-taking, expected to persist  as investors continue to sell off some of their shares to make quick gains, in response to  gains recorded on the share prices of majority of the quoted companies, over the last couple of days.

Last week, gains on the prices of highly capitalised stocks buoyed the value of listed equities on the Nigerian Stock Exchange (NSE) by N48.25 billion, as the market capitalisation, representing total value of listed stocks rose by 0.87 per cent to close at N5.579 trillion from N5.531 trillion at which it opened the week. Also the All-share index rose by  201.38 basis points to close at 23,168.64 points from 22,967.26 points at which it commenced trading in the week under review.

Oando Plc’s right trading enjoyed the patronage of investors and operators, as there was huge clamour for the shares of the oil and gas major.

The heightened interest witnessed in the right trading, was a result of the closure of the offer. The rights issued closed last Friday and according to market sources, the offer should  record considerable success.

However, investors shun the ongoing rights trading in the shares of Interlinked Technologies Plc, while Hallmark Paper Products Plc recorded minimal patronage.

The level of patronage recorded by both companies may be as a result of the low publicity given the offer, as a number of investors who spoke to Vanguard claimed that they are not aware that both Hallmark and Interlinked Technologies are currently undertaking rights issue.

According to analysis of rights trading in the week under review released by the NSE, investors traded in rights of two quoted companies — Oando Plc and Hallmark Paper Products Plc. A turnover of 125.3 million shares worth N741.93 million was recorded in 112 deals in contrast to the previous week’s turnover of 30,000 shares valued at N8.500 traded in 3 deals.

Bond prices to rise further

The bullish trend in the bond market will persist this week given the enormousity of idle funds in the interbank market.
With an inflow of about N600 billion from the statutory allocation fund and excess crude oil account, the bond market is expected to experience further increase in  demand as banks seek ways to invest their funds.

Last week increased demand pushed up prices of FGN bonds with some stocks recording more than N3 price increase. Also the N75 billion worth of FGN bonds offered by the DMO last week recorded 169 per cent over subscription
In the Over-the-Counter (OTC) market for FGN bonds, last week, a turnover of 368.82 million units valued at N433.34 billion in 5,388 deals in contrast to the previous week’s turnover of 372.2 million units valued at N456.83 billion in 4,965 deals.

The Fourth FGN Bond 2014 Series 3 recorded the highest patronage in the sector, trading 52.3 million units valued at N66.26 billion in 1,045 deals. This was followed by the 6th FGN Bond 2029 Series 3 with a turnover of 40.9 million units valued at N57.71 billion in 401 deals.Of the 38 FGN Bonds available, 17 were traded last week, compared to 18 traded in the preceding week.

Mutual funds listed on the Memorandum Quotation sector of the Nigerian Stock Exchange (NSE) are expected to post impressively, this week. This is as a  result of the upward trend recorded in the equity’s segment of the Nigerian capital market.

With the seeming return of stability to the capital market and with most countries coming out of recession, local and foreign fund managers are expected to channel substantial part of their funds to the market. This will bring about an improvement in the capital market and an increase in fortunes of the mutual funds sector.

Marginal movement of exchange rate to persist

The Naira is expected to record  marginal movement while remaining below the N149 per dollar mark.
But that is to the extent the Central Bank of Nigeria (CBN) clears any build of unmet demand in the official foreign exchange market.

Last week, the naira opened with 12 kobo appreciation against the dollar in the first foreign exchange auction conducted by the CBN on Monday, with the official  exchange rate dropping to N148.48 from  N148.6 48.  But it closed the week with 30 kobo depreciation at the second auction on Wednesday as the official exchange rate rose to N148.71 per dollar.

However, at the interbank foreign exchange market, the naira gained 106 kobo as the interbank exchange rate dropped to n150.4 per dollar from N151.46 per dollar.

At the parallel market the exchange rate remained stable at N151.5 owing to weak demand attributed to the month long industrial holiday in China.

Cost of funds to dropped slightly

With inflow of about N600 billion from statutory allocation fund and excess crude fund, interbank interest rate would slightly decline further this week.

The inflow of funds which worsened the excess liquidity in the system last week forced cost of funds to drop marginally. Interest rate on Call lending dropped to 2.275 per cent from 2.375 per cent, interest rate on Seven days lending dropped to 4.96 from 5.625 per cent while interest rate on 30 days lending dropped to 10.125 from 11.5 per cent.


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