7 Blue chips companies account for 71% of stock market capitalisation in April
Of the total stock market equities capitalisation valued at ₦11.997 trillion in April, just 7 companies account for a significant proportion.
These industries stalwart combine value represents more than 70% of total equities capitalisation on the Nigerian Stock Exchange.
The market movers include the MTN Nigeria Plc which happens to be the most valuable, followed closely by Dangote Cement.
Meanwhile, analysts express worry that movement in prices of these large caps stocks determine market direction per trading session.
Thus, based on the last trading performance data, Airtel Africa ranked third, followed by BUA Cement which recently listed.
Following in the list was consumer goods operator, NESTLE Plc, which happens to command one of the highest prices, trading at more than ₦920 per share.
In the banking sector, only GTBank and Zenith Bank Plc are among the bellwethers stock that have movement effects on the local bourse.
MarketForces Research analysts observed that the 7 large caps have a combined value of ₦8.516 trillion in the last trading session in April.
Analysts explained that before the bearish run in the market, these companies has taken up to 80% of the market capitalisation.
“The situation is worrisome as there is always a strong shake-off when these blue chips companies prices go south”, analysts explained.
Before now, these companies excluding BUA Cement had combine market capitalisation that pitched at about ₦9.15 trillion at the end of trading on Friday 26th July, 2019.
Analysts said that movements in the prices of these stocks have strong influence to drive market performance north or south depending on the investors’ sentiment.
In a conversation with participants at MarketForces Analysts’ Webinar held on Friday, some experts in the financial service sector think that the stock market is not deep enough for the size of Nigeria’s economy.
Participants at the event agreed that there have been few financial teachers to preach stock market investment to people.
It is believed that the more people that participate in the stock market investment, the deeper the stock market.
Experts also advised stock market authority to ensure mechanism that reflects information and data just in time in stock price movement.
Research analysts at LSintelligence said that if the value of new listing were to be removed, stock market capitalisation would have been very low.
Comparing the market size with pre-2008 financial crisis, you would observe that the market has not really grow to measure up with the size of the economy, analysts said.
Analysts added that movement in prices of shares of heavy-weight big balance sheet size companies have significantly impacted market situation.
MarketForces gathered that sell-offs in any of these large companies have capacity to drag the market down in direct proportion.
On Friday, the Nigerian Stock Exchange market capitalisation closed the week at ₦11.997 trillion, as equities prices declined on a sustained bearish run.
Sell-offs among these blue chips have had proportional effect in terms of value draw down that the market has witnessed since the beginning of the year.
“Looking at the market data in its absolute form would make any analysis to be wrong”, analysts explained.
Analysts advised NSE authority to consider a workable plant to reflate market performance and perhaps canvass for more companies to list.
Analysts noted that numbers of companies whose stocks rarely moves are on the rise. One would observe that these zombie stocks are not trading for lack of liquidity.
“The fact that they are not in demand should be enough reason why they should be expunged from the bourse or manage in other way for best value”, participant discussed.
Technically, market cannot continue to say there are some 100 companies that are listed on the bourse.
“Let the market deal with performing stocks”, analysts stated.
At ₦130 per ordinary share, Dangote Cement Plc market cap closed at ₦2.215 trillion on 17,040,507,405 shares outstanding.
Before coronavirus pandemic hits the Nigerian economy, the company had planned to buy its shares back.
The share buyback, according to analysts, is to reduce weight as shareholders observed that NSE has failed to reward performance.
Also, MTN Nigerian market capitalisation settled at ₦2.279 trillion capitalisation. The telecom giant traded at ₦112 per ordinary share at the close of market in April.
The Telco has 20,354,513,050 shares outstanding.
Meanwhile, Airtel Africa Plc which listed after its major competitor, MTNN, stock traded at ₦298.9 at the close of trading in April.
Shareholders of the second largest telecommunication firm valued the company at ₦1.123 trillion.
Also, Nestle Plc worth ₦729 billion on the local bourse as it traded at ₦920.2 on 792,656,252 shares outstanding.
From the banking segment, both Guaranty Trust Bank and Zenith Plc market value have declined significantly from their peak points.
At share price that traded at ₦21 on the last trading day in April, GTB market capitalisation closed the day at ₦618 billion.
In the period under review, investors placed ₦14.3 on Zenith’s share as lender’s market cap settled at about ₦449 billion on 31,396,493,786 shares outstanding.
7 Blue chips companies account for 71% of stock market capitalisation in April
