Â The banking, building materials and construction sub-sectors of the nationâ€™s economy hold the key to capital market recovery, according to a market research carried out by Value Capital Limited.
This is contained in the companyâ€™s findings made available to the investing community, recently.
The company said that the findings were the results of a one-year market review of selected sectors on the Nigerian Stock Exchange (NSE) by its Research and Publication Unit.
According to the report, the market review has been carried out on three sectors of the NSE that in our considered opinion hold the key to its recovery or downturn – these are the banking sector, the construction and building materials sectors.
It further noted that the banking sector which accounts for 60 per cent of the market capitalisation is significant to the market overall state.
The company noted that daily transactions show the sector always emerging the most active in volume and value noting that activity in the sector determines the direction of the market, either upward or downward.Â
It further stated that two other sectors were selected for the study because of their seeming resilience to prolonged meltdown with stability toward value addition against other sectors that have consistently recorded losses.
It said, â€œIn fact, it has been predicted that the two sectors would spearhead the recovery of the Nigerian capital market. The review covers May ending 2009 to May ending 2010.Â
â€œThe period is significant because at both ends, the market experienced a rebound from the lowest state of the first quarter in the two years.â€
It said that the 52 weeks performance of the banking stocks shows that it lost an average of 48.9 per cent between May 28, 2009 and same period in 2010.
The publication said that the sector recovered marginally by 9 per cent the value lost in Year_to_Date (YTD) from the opening value in May 2010 ending.
According to the report, the implication is that the present value of stocks is still below the value in 2009 except for the GTBank and Skye Bank.
It said the sector has lost 48.9 per cent in value from its 52 weeks value in 2009, indicating that the sector is worse off and has yet to recover from effect of the global meltdown.
â€œAvailable data point to the fact that the banking sector recovery is not in anyway insight as the sector has been crippled through the CBN reforms programme.
â€œWe also state that the sector needs to recover first from the effect of that reform before recovering fully from the global meltdown that has hit the world financial markets,â€ it said.
According to the publication, the YTD return in the construction sub_sector by May ending 2010 stood at 70.9 per cent as against the negative return of 15.8 per cent same period in 2009.
It said the calculations were based on the two active stocks in the sector, Costain West Africa and Julius Berger.
The return is as high as 110.7 per cent in contrast to the negative 27.45 per cent recorded the previous year.