As the deadline for regulatory filing of full year 2017 earnings ended, attempts by the results of the few quoted banks to woo investors with high dividend payouts have not yielded the desired result, as the banking index fell by 9.55 per cent, the highest decline for the month of March.
For the month of March, the Nigerian Stock Exchange (NSE) All-Share Index declined by 4.21 per cent, the second consecutive month of loss to close at 41,504.51 on March 29, 2018 from 43,330.54 at which it opened for the month. Also, the market capitalisation shed N557 million to close the month of March at N14.993 trillion as against N15.550 trillion on February 28, 2018.
For the month of March, all the sectoral indices closed negative except Oil and Gas sector that gained by 0.95 per cent. The banking index led the loser by 9.55 per cent, Industrial Goods index followed with a decline of 6.77 per cent, while Alternative Securities Market (ASeM) declined by 6.70 per cent.
Insurance index was down by 4.08 per cent, while Consumer Goods index depreciated by 2.54 per cent.
Reviewing the banking stocks for the period showed that out of 16 banks listed on NSE, six had released their audited results which have shown impressive performance with good dividend declared.
For example, Access declared a final dividend of 40 kobo per share, Guaranty Trust Bank proposed a final dividend of N2.40 and Zenith Bank gave a final dividend of N2.45 per share. UBA and Stanbic IBTC declared a final dividend of 65 kobo and 50 kobo per share.
Notwithstanding the dividend declared, Access Bank shares for the month of March dipped by 15 per cent, Guaranty Trust Bank’s shares went down by 8.78 per cent, while Zenith Bank share depreciated by 8.2 per cent. The overall market performance as indicated by the NSE-ASI has continued to trend southwards despite decent earnings declarations by companies.
Stocks market analysts have said the reasons are not far-fetched, the earnings declaration session fell at a time when the market was experiencing correction from the January 2018 rally when the ASI emerged as one of the best performing markets globally.
Analysts at United Capital said that in fact, nine months 2017 earnings already gave a good indication of the magnitude of full year earnings declaration and investors appeared to have priced this into their buying decisions early in the year. According to them, in effect, full year 2017 earnings declarations were not sufficient to drive the market back to the green region. The lack of clarity in the fiscal and monetary policy directions further weighed on market sentiments despite the continued deceleration in interest rate.
They noted that “as the market lingers in the oversold region, we expect investors to seek bargains in the short term, before the onset of volatility that trails pre-election jitters later in the year.”
The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said the stocks market for the month of March closed in red despite impressive financials and high dividend payout for the 2017 financial year.
According to him, the NSE All-Share index broke down the yellow trend line, confirming that the market entered its long bearish mode, since the full year earnings season has not influenced equity prices positively or supported market value.
He said:“What the stocks market is experiencing showed that liquidity is not flowing into the market. Rather, the Nigerian market is experiencing a liquidity squeeze as revealed by institutional money flow index of the NSE.”
He stated that the recent performance of both the international and locally markets show that there is a clear divergent between the equity market and crude oil price movement, saying that before now, oil price movement had been linked to equity market movement, unlike the present situation when oil prices are looking up while equity markets globally are going south. All of these are happening despite the growth being experienced in the world economy and recovery being experienced here in Nigeria.
Omordion said:“Despite the continued bearish mode of the market, we expect repositioning to continue, while profit taking will reduce on the strength of expected payouts and earnings surprises.
“With more income investors taking position in value and dividend paying stocks, alongside bargain hunters, we expect the Monetary Policy Committee (MPC) meeting to give direction of the interest rate as inflation continues to decline, thereby further driving the economic recovery and flow of funds.
He advised investors to not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing, saying “we advise investors to allow numbers guide their decisions while repositioning for the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.”