- Category: Business and Economy
- Published on Monday, 03 October 2011 05:37
- Written by Admin
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The value of equities listed on the Nigerian Stock Exchange (NSE) plunged by N1.417 trillion in the nine months period, which ended September 30, 2011, indicating a dip of 18 per cent from N7.914 trillion to N6.497 trillion.
The value of equities, had this time last year, recorded a growth of N659 billion or 13 per cent, while the index appreciated by 11 per cent within the nine months period.
However, waned investors’ confidence, attractive yield in fixed income securities, general investor apathy on the side of retail investors have so far retarded the expected recovery in the market this year.
The market had opened the year on a positive note closing the month of January with a growth of about 8.3 per cent. But efforts to attract investors back to the market have been thwarted by uncertainty over the recapitalisation of the rescued banks, insecurity engendered by the spate of bombings in some part of the country.
Also, the sovereign debt crisis in Europe and the United States, which sparked massive sell-offs by foreign investors contributed to the dismal nine-month performance the Nigerian equities market witnessed .
Besides, the delisting of leading bottling firm, Nigerian Bottling Company Plc and Nampak Plc reduced the value of the listed equities.
Market analysts said save for the price gains witnessed in the last three days of last week, following shareholders’ endorsement of the recapitalisation plans of the five rescued banks, the dip in value would have been worse.
Majority of the stocks are trading below their year’s opening value, with many in the insurance sub-sector selling at their par value.
However, analysts at Afrinvest West Africa Limited, said the the market valuation of many listed stocks, implied deep discounts from fundamental valuation perspective.
According to them the depth of the under-valuation is even more pronounced for Nigerian banks, whose valuation multiples have traded down significantly, from 14.8x and 1.4x for price earnings (P/E) ratio and price to book (P/B) value ratios between May 31 and September 28, 2011 to 8.8x and 0.9x respectively over the same horizon.
Afrinvest, therefore called on domestic investors to take advantage of the low valuations.
“We see this as an incentive for investors who stand to gain from the effects of a potential rally on portfolio performance. The upsurge may deliver stock returns in excess of fixed income and money market instruments and erode previous losses recorded by equity market instruments,” they said. (ThisDay)