The Nigerian equities market closed the first month of 2014 on negative note last Friday, shedding N221 billion contrary to enthusiasm expressed at the beginning of the year. The market, measured by benchmark performance indicator, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) fell by 1.8 per cent in January of 2014, compared with a growth of 13.3 per cent in January 2013.
Having posted a growth of 47 per cent in 2013, market analysts had expected a sustenance of the positive trend in the first quarter of the 2014.
Although the market began the month positively, the bears set in when investors reacted to the further hike in the cash reserve ratio (CRR) for public sector funds in banks to 75 per cent from 50 per cent by the Central Bank of Nigeria (CBN).
The ASI shed 1.10 per cent a day after the hike in the CRR was announced. While that decline was recouped the following day, the banking stocks still dictated the direction of the market depreciating by 3.01 per cent post the announcement of the hike.
By the close of trading last Friday, which was the last day of the month, the ASI had dipped by 1.83 per cent to 40,571.62, down from 41,329.19 at which it began the year. Similarly, the market capitalisation fell from N13.226 trillion to close at N13.005 trillion.
All the sectoral indices, except the NSE Industrial Goods Index, posted negative returns in the first month of 2014.
The NSE Oil/Gas Index recorded the highest decline of 11.1 per cent followed by the NSE Banking Index with 7.2 per cent. The NSE Consumer Goods Index went down by 4.46 per cent, just as the NSE 30 Index shed 3.23 per cent. NSE Insurance Index fell 3.18 per cent.
The negative performance in the first month of the year notwithstanding, analysts at Meristem Securities Limited, an investment banking services firm, said companies with good track records of dividend payment would enjoy price appreciation due to expectation for 2013 full year results.
“With the earnings season drawing nearer, full year performances will play a major role in the direction of equities performance. Companies with good track records of dividend payment would likely enjoy price appreciation as investors key in to stocks with likely exciting dividend yield income, in addition to capital gains,” they said.
While operators had envisaged another bull positive performance for 2014, the Managing Director of Financial Derivatives Company, Mr. Bismarck Rewane said the growth this year would be lower than what was achieved in 2013.
According to him, the market will grow by 28 per ent this year as against 47 per cent last year, advising investors to invest in companies with strong fundamentals.