Nigeria: Six companies account for 67% of equities market capitalisation

Nigeria: Six companies account for 67% of equities market capitalisation

Just six companies account for about 70% of the Nigeria Stock Exchange equities market capitalisation, analysts market review has shown.

These companies are Dangote Cement, MTNN Plc, Airtel, and Nestle including GTBank and Zenith International Bank Plc with combine market capitalisation pitched at about N9.15 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’ Roundtable 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.

They however said that opportunity to restructure by redesigning the stock market mechanism still lacking.

Participants at the event agreed that there have been few market evangelists to preach the economic gospel that emphasize the needs to deepen the market. Also to ensure mechanism that reflects information and data just in time in stock price movement.

Consultants at LSintelligence said that If we remove N3 trillion added by the new listing, NSE market capitalisation is just about N11 trillion. Compare 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 added that movement in prices of shares of heavy-weight big balance sheet size companies listed on the floor of stock exchange has significantly impacted equities market capitalisation.

It was noted that stock sell-offs in any of these companies have capacity to drag the market down.

On Friday, the Nigerian Stock Exchange market capitalisation closed the week at N13.61 trillion, as equities prices declined on a sustained bearish run.

As a result, sell-offs among these blue chips has at least 70% equivalent in the value draw down that the market has witnessed since the beginning of the year, analysts observed.

Kingsley Ezoh, Senior Consultant with LSintelligence Associates said, “Looking at the number in its absolute form; would make any analysis to be wrong ab initio. You would observe that there are zombie stocks that are not trading for lack of liquidity. The fact that they are not in demand should be enough reason why they should be expunge from the bourse”.

So, technically we cannot continue to say there are 170 companies that are listed on the bourse. Let the market deal with performing stocks, Ezoh added.

On the sustain bearish trend, Moses Ojo FCA, ACCA, Head of Investment Research at PanAfrican Capital said this reason is mainly as a result of the high yield on the fixed-income instruments.

As long as this prevails, investors will continue to shun the equity market. Reacting to when market rebound is expected, Ojo said that there are other factors, which will determine the direction of the market going forward.

“Part of it is the debt re-balancing strategy of the Federal Government; if they will still continue with it then this will make yields to be moving downward.

“Also, the direction of inflation is another factor, as inflation is coming down, yield on fixed income instruments are also expected to be coming down. All these factors are expected to have positive impact on the equity market”, he added.

However, he said we shall know the direction of the debt re-balancing strategy of the government when the cabinet comes in place.

Dangote Cement Plc has 17,040,507,405 shares outstanding worth N 2.89t trillion. It has traded between N170 and N174 per share in the last 7-days.

Also, MTNN Plc with contributed N2.585 trillion to the overall market capitalisation, just as Airtel Africa which recently listed at N1.38 trillion now command N1.215 trillion to the equities market size.

MTNN Plc has 20,354,513,050 shares outstanding and has traded between N125 and N128 in the last 7-days. NESTLE Plc has 792,656,252 outstanding and has traded between N1, 245 and N1, 327 in the last 7-days.

From the banking segment, both Guaranty Trust Bank and Zenith Plc came out strong in terms of equities market size.  GTB market capitalisation closed the day at N837.17 billion.

This was followed by Zenith which the market valued at N580.835 billion which has traded between N18.40 and N18.60 in the last 7-days and outstanding shares of 31,396,493,786.  In the FMCG segment, the market now places N1.03 trillion on Nestle Plc.

In its review of first half performance, Lead Capital stated that numbers of listed equity increased to 169 from 168 in December 2018. However, the entrance of Airtel Africa has pushed the number to 170.

The firm stated that NSE ASI closed the half year at 29,966.87 down by -4.66%from 31,430.5 points at the close of 2018.

In the first half of 2019, year to date performances across key index were negative. NSE 30 index down by 11.39% while NSE 50 shed 10.77% just as NSE Banking nosedived by 8.04%.

Index measuring both consumers and oil and gas were hit the most. NSE Consumer went south by 16.89%, followed closely by NSE Gas index at 16.21% to reflects longstanding bearish performance across the market.

In its analysts at Lead Capital noted as at 31 May 2019, total transactions at the nation’s bourse increased by 48.49% from N148.91 billion which was about $485.9 million recorded in April 2019 to N221.13 billion -that is about $713.7 million- in May 2019

However, the performance of the month of June when compared to the performance in the same period in 2018 revealed that total transactions reduced by 30.52%.

In May 2019, the total value of transactions executed by domestic investors significantly outperformed transactions executed by foreign investors by 30.00%.

Lead Capital reckoned that market was initially dominated by foreign investors up to May 2019. Then, the domestic space is dominated by institutional investors.

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Nigeria: Six companies account for 67% of equities market capitalisation