Precautions abound for traders as exchange approaches critical point

The Nigerian stock market recorded a turnover of 2.65 billion shares valued at N21.5 billion in 31,639 transactions through the week ended November 12, 2010. Of this volume, the banking subsector accounted for 32.60%; volume in the banking sector was mainly enhanced by transactions on the shares of United Bank for Africa Plc, Oceanic Bank, Zenith Bank Plc and Guaranty Trust Bank Plc. In all, the sector did 1.9 billion shares worth N13.45 billion in 16,158 transactions. Just like other weeks, the Insurance sector followed in the performance line with 271.5 million shares valued at N186.9 million exchanged by investors in 1,324 exchanges.

All Share Index of the Nigerian Stock Exchange (NSE ASI) closed up by 567.36 points or 2.33% from the opening figure of 24,800.47 to 25,367.83 points. Two black days and three bullish moves took the said indicator to its present trading point. At the end of the week, 60 stocks closed above their respective opening prices, 27 shed price while 116 resisted both the bull and bear’s forces and closed on a flat note. Meanwhile, advancing equities moved 2.138 billion shares same as 80.66% of market volume. Declining stocks did 168.59 million shares or 6.36 of market volume while unchanged equities accounted for the remaining 12.98% of the market volume. This indeed is a bullish market. Noteworthy is the fact that all stocks in the banking sector closed above their respective opening prices.

NSE ASI is currently trending around a very sensitive resistance point, this point have acted as a fair support during the 1st quarter of the year after which it turned out to strong resistance point. Good break above 25,900 points is very bullish, though traders need to tread carefully at this critical region as sustaining it will require sound market fundamentals. Although some equities especially in the banking sector seems protected from sharp bear’s knife, movement on their prices in recent times has been very sharp and should be watched carefully. We do not expect any sharp drop but we foresee a situation where they struggle around some short range just as we see on the share price of First Bank. If this happens, hasty traders may attempt exit at all cost. In conclusion, every entry in the banking stocks should be done very cautiously.

Spring Bank came into existence from the Central Bank of Nigeria (CBN) directive of July 6, 2004 on bank capitalisation and consolidation (shoring up capital base to N25 billion). ACB International Bank Plc, Citizens Int’l Bank, Fountain Trust Bank, Guardian Express Bank, Omega Bank, and Trans Int’l Bank merged to form Spring Bank Plc.

A new era sprung up when Bank PHB Plc acquired majority stake in Spring Bank Plc on December 18, 2008 as such it became part of Bank PHB Group. Consequently, a new Board of Directors was approved by the CBN for the bank but it currently maintains its independent account.

In the bank recent results for unaudited Q3 for the period ended September 30, 2010, its performance indexes grew strongly upside. Turnover within the period grew by 20.4% at N18.64 billion against N15.48 billion in Q3 of 2009. Profitability index had a stronger growth by over 111.5% at PAT and PBT positions. This is an outstanding performance due to the fact that the bank recovered from loss after tax figure of N28.64 billion in Q3 2009 to net profit of N3.28 billion in the current report. The effect of recovery was more reflected on earnings and ratio indicators. Q3 EPS now stands at 29 kobo.

A total turnover of 184.43 million units worth N179.77 billion in 1,068 deals was recorded last week, in contrast to a total of 277.45 million units valued at N271.38 billion exchanged in 1,828 deals during the week ended Thursday, November 4, 2010. Measured by turnover/volume, the most actively traded bond was the 9.45% FGN January 2013 (5th FGN Bond 2013 Series 1) with traded volume of 36.0 million units valued at N35.89 billion in 295 deals. This was followed by 10.00% FGN July 2030 (7th FGN Bond 2030 Series 3) with a traded volume of 29.1 million units worth N21.80 billion in 254 deals.

Twenty-one (21) of the available thirty-five (35) FGN Bonds were traded during the week, compared with twenty-six (26) recorded in fortnight ago.