How capital market fared in half year 2014

The performance of 200 listed equities on the Nigerian Stock Exchange (NSE) during the first half of the year has been on a positive trend, although, the appreciation recorded in the equity sector of the market is not good enough when compared with the same period of 2013.
Many financial analysts at the beginning of the year predict that the market may plummet at the end of the year.
Riding on the back of sustained gains in May and June, the stock market had erased the losses in the previous four months and left the investors with some N802 billion in capital gains.
Available statistics show that the market capitalisation of the equities during the half year period of 2014 gained N802 billion, translating to 6.06 per cent from N13.226 trillion it opened the year to close at June 30, 2014 at N14.028 trillion.
This is not impressive when compared with N2.452 trillion recorded during the half year of 2013, representing 27.32 per cent from N8.974 trillion it opened in 2013 to N11.426 trillion on June 30, 2013.
Also, the NSE All-Share Index (NSE ASI) during the half year of 2014 recorded 1,153.29 basis points or 2.79 per cent increase, from 41,329.19 points to 42,482.48 points at the end of June 2014. The gain recorded in NSE ASI in half year 2014 is meagre when compared with over 8,000 basis points, representing 28.80 per cent, recorded in half year 2013.
Four out of eight market indices appreciated during the half year of 2014, while the remaining four depreciated during the period. The NSE Oil & Gas sector index recorded highest gain during the review period with 37.77 per cent increase, followed by NSE Industrial index with 1.18 per cent increase, NSE 30 index which is designed for 30 most capitalised stocks recorded 1.29 per cent gain and NSE Lotus Islamic Index which meant for the Sharia compliant stocks gained 0.40 per cent.
On the other hand, NSE Insurance Index recorded the highest drop of 3.95 per cent, NSE Consumer Goods Index followed with 3.82 per cent drop and NSE Banking Index and NSE Alternative Securities Market Index (ASeM) recorded 3.34 and 1.18 per cent depreciation respectively.
Meanwhile, all the NSE sectoral indices appreciated during the half year of 2013.
Market analysts expect the stock market to outperform its first half in the second half and still deliver an average of double-digit returns to investors in the year.
Most investment experts said they expected the market to witness improved performance in the second half.
A stockbroker, who spoke on condition of anonymous, said the stock market would witness stronger uptick in the second half citing increasing investors’ appetite and expected results of quoted companies.
According to him, while analysts had expected stronger performance in the first half of the year given similar performance last year, external variables depressed share prices as the market failed to react positively to impressive year-end results and attractive corporate actions by listed companies.
He expressed optimism that the market could still make a double-digit return in the second half to override the lull in the first half, noting that the expected release of the first half earnings of quoted companies could trigger bullish rally for several stocks.
“Barring any further external shock, we expect the market to close the year with NSE’s index at 46,924.59 points; a return of about 14 per cent for 2014,” he said.
Commenting on the market performance, a financial analyst, Mr. Tunde Oyediran, said the performance was tremendous. The last time the Index was in 43,000 thresholds was in October 2008 which it almost reach at the end of 2014 half year, and the N14 trillion landmark of market capitalisation at the end of first half of 2014 was also an all-time new high.
In addition to this, we have noticed the increasing level of FPI in our capital market. Looking at the level of transactions in the NSE for the period ended 31 December 2013, FPI was almost 51 per cent down from 61 per cent in 2012, while domestic investors’ share of transaction was about 49 per cent and 39 per cent in the respective periods. As of May 2014, FPI transaction in our market dominated 63 per cent of total market trades and was as high as 78 per cent at the end of Q1 2014.
“Some people may argue that this is not healthy and portends danger for our capital market if we experience capital flow reversal. Inasmuch as one is tempted to believe this view in totality, I think that opinion is one-sided and suffers from confirmation or representativeness bias and a kind of faulty generalisation. In so doing, we may be ignoring the veritable role the FPIs are playing to develop and deepen our market, because it also signals their confidence level in our market. Don’t also forget the fact that in 2013, our market gave them over 47 per cent return on their investments which was far and above the rate of returns by most global markets,” Oyediran said.