Banking and insurance stocks have come under intense pressure at the stock market amid concerns that the ongoing cash crisis could negatively impact the performance of financial services sector.
Benchmark indices at the stock market at the weekend indicated that banking and insurance stocks were the major losers in a resilient market.
The benchmark index for the Nigerian equities market at the weekend showed a modest positive return of 0.21 per cent for the week, but insurance and banking stocks recorded the highest average losses during the week. Consumer goods sector, which distributive trade business is expected to be impacted negatively by naira notes scarcity, also came under pressure.
The NGX Insurance Index recorded average decline of 3.32 per cent, the highest during the week. It was followed by the NGX Banking Index, which dropped by 0.90 per cent.The NGX Consumer Goods Index recorded average loss of 0.63 per cent. The NGX Pension Index, which tracks stocks specially screened for pension funds’ investments and has substantial exposure to financial stocks, also trended negative with average return of -0.43 per cent.
Compared to the contrarian sectors, other sectors closed on the positive, rallying the market position to average gain of 0.21 per cent. The NGX Industrial Goods Index rose by 0.65 per cent. The NGX Oil and Gas Index appreciated by 0.63 per cent.
The NGX 30 Index, which tracks the 30 largest stocks at the stock market, rallied by 0.34 per cent. The NGX Lotus Islamic Index- an ethical index based on the concepts of Islamic finance, which excludes nearly all banking and insurance stocks, rose by 0.51 per cent.
The All Share Index (ASI) – the common value-based index that tracks all share prices at the Nigerian Exchange (NGX), closed weekend with average gain of 0.21 per cent. This nudged the year-to-date return for Nigerian equities to 6.0 per cent.
The pressure on banking and insurance stocks came amid apprehensions of consequential backlashes from the ongoing scarcity of new naira notes and resultant protests. Banking premises had come under violent attacks by angry customers who were frustrated by inability to access naira notes.
Many banks’ offices had also been fingered in alleged hoarding of the new naira notes and there were concerns they might be sanctioned by the Central Bank of Nigeria (CBN), which has struggled unsuccessfully to justify the quagmire that its naira redesign policy has turned into.
The Council of State – a body of top past and current government functionaries that serves as topmost consultative assembly, which noted the hardship that the naira notes scarcity had created, advised that more new naira notes should be printed or the apex bank should re-circulate the old naira notes. Most experts have also called for co-existence of both old and new naira notes for extended period.
The apex bank at the weekend debunked the rumours that it was planning to close down some banks, describing the rumours as misleading and illogical, and an attempt by desperate persons to incite the public against the apex bank.
Banks constitute one of the biggest sectoral customers to the insurance sector, with several active insurance policies covering employees, assets and premises. Besides, protesters also destroyed several properties, many of which may be subjects of claims.
Insurance operators have affirmed that they will honour claims for every covered assets and individuals. Insurance companied had paid N20 billion as claims for damaged properties during the EndSARS protests.
Chief Operating Officer, GTI Capital, Mr. Kehinde Hassan, said the capital market, as the barometer of the economy, is reflective of the underlying currents, adding that the market cannot be divested from the economic situation.
He noted that while the banks have shown resilience and their asset creation capacities remained high, investors could infer economic realities into their considerations, pointing out the spillover effect of the national rating downgrade on major banks recently.
He pointed out that a seamless operation would have allowed banks that had invested heavily in technology to reap the gains from the cashless policy.
“Beyond the extension of the lifespan of the old notes as legal tenders, the government should prevail on the CBN to ease the tension around cash withdrawal at the Automated Teller Machines (ATMs),” Hassan said.
Managing Director, Globalview Capital Limited, Mr. Aruna Kebira, said the pricing trend could “partially” be indicative of the concerns over the naira crisis, but it might also have been triggered by profit-taking and general concerns about the forthcoming general election.
“There is still some level of anxiety and uncertainty concerning the forthcoming elections, most investors want to be out before the elections,” Kebira, a Fellow of the Chartered Institute of Stockbrokers (CIS), said.
Managing Director, Sofunix Investment and Communications, Mr. Sola Oni, said some investors consider the insurance sector as a danger zone due to the unresolved recapitalisation of the industry while the macroeconomic environment may also influence investors; perception of the financial services sector, especially with the recent downgrade by Moody’s Investors Services.
He said the sell pressure might also be due to need for liquidity as investors with urgent monetary need would consider sale of the more liquid shares than any other assets. Banking stocks are arguably the most liquid stocks at the stock market.
Banking and insurance stocks dominated the top losers’ list at the NGX, accounting for half of the week’s 10 highest losers, in percentage terms. Prestige Assurance recorded the second highest loss of 13.04 per cent to close at 40 kobo. Mutual Benefits Assurance dropped by 11.11 per cent to close at 32 kobo. Royal Exchange declined by 9.76 per cent to close at 74 kobo. Sterling Bank declined by 7.36 per cent to close at N1.51 while Consolidated Hallmark Insurance dipped by 7.35 per cent to close at 63 kobo.
Other top losers for the week included FTN Cocoa Processors dropped by 15.15 per cent to close at 28 kobo. Japaul Gold & Ventures declined by 11.76 per cent to close at 30 kobo. McNichols lost 8.96 per cent to close at 61 kobo. The Initiates dropped by 8.33 per cent to close at 44 kobo while Champion Breweries declined by 8.16 per cent to close at N4.50 per share.
The ASI closed weekend at 54,327.30 points as against its week’s opening index of 54,213.09 points. Aggregate market value of all quoted equities at the NGX dropped from the week’s opening value of N29.528 trillion to close weekend at N29.591 trillion, representing net capital gain of N63 billion.
With nearly two decliners for every advancer, the positive overall market situation was driven by gains by large-cap stocks, as indicated by the NGX 30 Index. There were 45 losers to 24 gainers last week compared with 27 loses and 55 gainers recorded in the previous week.
Tripple Gee and Company led the gainers with a gain of 30.48 per cent to close at N1.37 per share. International Energy Insurance followed with a gain of 25.25 per cent to close at N1.24. Conoil rose by 20.94 per cent to close at N32.05. MRS Oil Nigeria appreciated by 9.82 per cent to close at N21.25. Northern Nigeria Flour Mills rose by 9.74 per cent to close at N10.70 while Red Star Express rallied 9.49 per cent to close at N2.77 per share.
The momentum of activities at the NGX also slowed down considerably with total turnover of 944.293 million shares worth N22.710 billion in 18,615 deals last week as against 3.789 billion shares valued at N27.500 billion traded in 20,333 deals two weeks ago.
The financial services sector remained atop the activity chart with 634.086 million shares valued at N6.442 billion traded in 8,540 deals; thus contributing 67.15 per cent and 28.37 per cent to the total equity turnover volume and value respectively. The consumer goods sector followed with 78.603 million shares worth N2.218 billion in 2,993 deals while the conglomerates sector placed third with a turnover of 59.564 million shares worth N110.109 million in 788 deals.
The three most active stocks were Guaranty Trust Holding Company Plc, Universal Insurance Plc and Transnational Corporation Plc. The three stocks accounted for 269.288 million shares worth N2.999 billion in 1,845 deals, contributing 28.52 per cent and 13.21 per cent to the total equity turnover volume and value respectively.
