Sell pressure yesterday dominated market activities as investors took profits from the previous day’s gain. Consequently, the overall performance measures, NSE ASI and market capitalisation fell by 0.19 per cent. This was due to profit taking by bargain hunters in the wake of cautious optimism that had pervaded the market following upset in the financial sector.
Consequently, the All- Share Index shed 49.02 basis points or 0.19 per cent to close at 25,282.75 index points as against 25,331.77 recorded the previous day, while market capitalisation of equities depreciated by N17 billion or 0.19 per cent to close lower as market sentiment returned on the red territory.
Meanwhile, a turnover of 147.8 million shares in 2,578 deals was recorded in the day’s trading.
The banking sub-sector of the financial services sector was the most active (measured by turnover volume) with 66.4 million shares exchanged by investors in 76.2 deals. Volume in the sub-sector was largely driven by activities in the shares of Diamond Bank Plc and GTB Plc.
Also, other financial services sub-sector, boosted by the activities in the shares of FCMB Plc and United Capital Plc followed with a turnover of 18.3 million shares in 248 deals.
The number of gainers at the close of trading session was 16, while decliners closed at 15. Further analysis of the day’s trading showed that African Prudential Registrars Plc topped the gainers’ table with 4.98 per cent to close at N2.53 per share, while Vitafoam Plc followed with 4.74 per cent to close at N1.99 per share. Diamond Bank Plc gained 4.71 per cent to close at N89 per share.
On the flip side, Seven Up Plc led the losers’ chart with a drop of five per cent to close at N99.66 per share.
Okomu Oil Plc trailed with a loss of 4.99 per cent to close at N47.39 per share while Unity Bank Plc dropped by 4.92 per cent to close at 58 kobo per share.
Stock market extends weekly loss by 1.13%
Following sustained profit takings, the NSE All-Share Index and market capitalization depreciated by 1.13 per cent to close last week at 42,638.83 and N15.302 trillion respectively.
Similarly, all other indices finished lower last week with the exception of the NSE Pension Index that appreciated by 0.08 per cent, while the NSE ASeM Index closed flat.
Further analysis of the weekly transactions showed that a total turnover of 2.940 billion shares worth N27.924 billion in 28,570 deals were traded last week by investors on the floor of the Exchange in contrast to a total of 4.426 billion shares valued at N24.236 billion that exchanged hands the previous week in 29,573 deals.
The Financial Services Industry (measured by volume) led the activity chart with 2.174 billion shares valued at N17.033 billion traded in 19,013 deals; thus contributing 73.96 per cent and 61.00 per cent to the total equity turnover volume and value respectively.
The Services Industry followed with 232.482 million shares worth N216.990 million in 734 deals. The third place was occupied by Conglomerates Industry with a turnover of 170.422 million shares worth N499.400 million in 1,578 deals.
Trading in the top three equities namely – Linkage Assurance Plc, Skye Bank Plc and FCMB Group Plc (measured by volume) accounted for 809.798 million shares worth N1.130 billion in 2,551 deals, contributing 27.55 per cent and 4.04 per cent to the total equity turnover volume and value respectively.
Thirty equities appreciated in price last the week, higher than 23 of the previous week. Forty-eight equities depreciated in price, lower than 64 equities of the previous week, while 94 equities remained unchanged higher than 85 equities recorded in the preceding week.
Also traded last week were a total of 25,586 units of Exchange Traded Products (ETPs) valued at N3.004 million executed in 11 deals, compared with a total of 1.200 million units valued at N6.951 million that was transacted the previous week in 10 deals.
A total of 2,785 units of Federal Government Bonds valued at N2.627 million were traded last week in 16 deals, compared with a total of 14,779 units valued at N14.050 million transacted the previous week in 18 deals.
‘IEFX window, CBN’s most important policy in 2017’
As the Central Bank of Nigeria (CBN) continues to receive commendation from various quarters for the stability of the naira in recent months, analysts at Financial Derivatives Company Ltd have attributed the positive development to the apex bank’s introduction of the Investors and Exporters’ Forex (IEFX) window, its consistent intervention in the forex market as well as higher oil prices and production.
In a note obtained by New Telegraph last weekend, the analysts also stated that the upward trend in capital importation into the country especially in Q3 2017 was mainly fuelled by the implementation of the IEFX window.
The experts said : “The introduction of the IEFX window in late April 2017 is arguably the most important policy implemented by the CBN in 2017. Prior to the introduction of the IEFX, foreign portfolio investors, particularly those repatriating funds from Nigeria, were concerned about the multiple exchange rates in the country.
There was a huge gap between the official exchange rate and the parallel market exchange rate, plus an opaqueness in the foreign ex-change management system (which caused uncertainty), and the acute scarcity of hard currency.
“Consequently, there was an exodus of foreign capital and little or no new investments into the country. However, foreign portfolio investors returned with the opening of the IEFX. Prior to this, investors were of the view that the naira was overvalued and not at a market-determined level. The IEFX window, higher oil prices and production, and the CBN’s consistent intervention in the forex market are the main drivers of the stability and the convergence of exchange rates in Nigeria today.”
They, however, argued that while the CBN Governor, the Director-General of the Debt Management Office (DMO) and other top government officials believe that the forex shortage in the country is over and that the naira will continue to gain traction, “ the fragile stability will disappear if there is any significant oil price or production shock or if sentiment moves against emerging market assets.”
According to the analysts such sentiments could include the US Federal Reserve [US Fed] raising interest rates in 2018, and with the 2019 elections coming up, a new spate of attacks on oil infrastructure.
“ In the event of an oil price or production shock, the CBN will have to choose between defending the naira with its reserves and letting the naira float freely,” the analysts stated.
The Governor of the CBN, Mr. Godwin Emefiele, disclosed last October that the foreign exchange inflows into Nigeria through the IEFX Window had reached $10 billion since the window was launched in April 2017.
Also, latest data obtained from the FMDQ OTC Securities Exchange, shows that the window recorded approximately $26billion transactions in 2017.
OTC products: IOSCO moves to protect investors
The International Organization of Securities Commissions (IOSCO) has issued a consultation report proposing policy measures for its members to consider when addressing the risks arising from the offer and sale of OTC leveraged products to retail clients.
The report on Retail OTC Leveraged Products identifies various regulatory approaches aimed at enhancing the protection of retail investors who are offered OTC leveraged products, often on a cross border basis.
The report covers the offer and sale by intermediaries of rolling-spot forex contracts, contracts for differences (CFDs), and binary options. Intermediaries market sells these products to retail investors in most IOSCO member jurisdictions.
According to IOSCO, retail investors use OTC leveraged products to speculate on the short-term price movements in a given financial underlying. The products are traded over the counter, and their pricing, settlement and trading terms are not standardized.
Typically, the products are offered through online trading platforms, and often though aggressive or misleading marketing campaigns. Several studies show that a large majority of retail investors in these complex products lose money.
In its report, IOSCO encourages its members to improve the practices of licensed firms that offer OTC leveraged products, in an effort to better inform investors about the features and risks of these products and to more effectively combat illegal cross-border activity in this area.
The policy measures IOSCO proposed in the report and offers guidance to regulators on how to apply each one include: A licensing requirement for all firms that sell the relevant products to retail investors either domestically or on a cross-border basis; leverage limits or minimum margin requirements; measures to address the risk of investors losing more than their initial investment; measures to enhance the disclosure of costs and charges of the products; measures to improve the disclosure of risks of the products, including profit and loss ratios; other focused requirements to enhance the quality of pricing and order execution; and, measures to restrict the sale, distribution and marketing of the products with a view to addressing mis-selling risk.
This consultation report is part of IOSCO´s ongoing work on retail investor protection. In December 2016, IOSCO published a fact-finding report titled Retail OTC Leveraged Products that describes the main risks, activities and participants in this retail OTC market segment.
The current consultation is part of a wider IOSCO mandate, which will also include policy proposals and guidance regarding investor education material on relevant products and firms, and enforcement approaches and practices to address the risks posed by unlicensed firms operating in this area.
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