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THISDAY • MONDAY, MAY 18, 2015 BUSINESSWORLD 29 MARKET REPORT Stock Market Rises by 0.15% as Bulls Return Goddy Egene and Eromosele Abiodun After seven straight sessions of negative returns, the Nigerian equities market bounced back last week to record an increase of 0.15 per cent.This was as a result of the positive outcome during the three last trading days week, help by bargain hunting by investors who wants to take position for possible gains. At the beginning of the week, the market had witnessed a mixture of poor sentiment and profit taking by anxious investors. Three consecutive bullish trading sessions that ended the week led the benchmark to a positive close, despite disappointing inflation and GDP data. Following the previous week’s all bear session, the declines had. continued into last week, with the Nigerian Stock a Exchange (NSE) All-Share Index ASI shedding 0.79 per cent cumulatively on Monday and Tuesday. However, the bulls returned on Wednesday and lasted through Friday, spurring the benchmark ASI to cancel initial losses. Consequently, the ASI recorded a gain of 0.15 per cent to close at 34,439.40 while market capitalisation rose by 0.16 per cent to close on Friday at N11.697 trillion. Last week’s gain improved the Month-to-Date and Year-to-Date returns to -0.77 per cent and -0.63 per cent respectively. Similarly, six indices finished higher during the week. The NSE Consumer Goods and NSE Oil/Gas Indices topped the gainers’ chart with respective increases of 0.66 per cent and 0.62 per cent, while the NSE Industrial Goods index went up by 0.14 per cent. However, the NSE Banking index shed 0.19 per cent, just as the NSE Insurance index went down by 0.14 per cent. Daily Performance Summary Investors’ outlook on the market remained negative at the resumption of trading last Monday as the equities market closed further southwards. At the close of trading for the day, the benchmark index recorded its sixth consecutive session of declines to settle at 34,341.88 (down 0.13 per cent). Market capitalisation, which closed at N11.66 trillion similarly lost about N16 billion. While volume of trades moderated (1.20 per cent), value of stocks traded improved (3.20 per cent). The market also closed on a negative note on Tuesday as the NSE ASI depreciated by 0.66 per cent to close at 34,115.49. The depreciation in the Index could be attributed to the losses recorded in the share prices of some highly capitalised stocks such as ETI Plc, Oando Plc, FBN Holdings Plc, Nigerian Breweries Plc and Dangote Sugar Plc, amongst others. Similarly, the market capitalisation depreciated by 0.66 per cent to close at N11.59 trillion.The total value of the stocks traded on the floors of the NSE was N3.29 billion, up by 39.18 per cent from N2.36 billion traded previous day. However, the market the closed on a positive note on Wednesday as the Bulls returned, punctuating seven straight sessions of negative returns. Guaranty Trust Bank Plc, Zenith Bank Plc and ETI Plc bolstered the positive session, offsetting declines in Dangote Cement Plc and UBN Plc. In all, the All Share Index was 0.27 per cent higher at 34,208.30 points with a corresponding market capitalisation of N11.61 trillion. The market remained positive Thursday as the NSE ASI appreciated by 0.60 per cent to close at 34,414.18, compared with the appreciation of 0.27 per cent recorded the prior day. The appreciation in the Index was as a result of the gains recorded in the share prices of Zenith Bank Plc, Dangote Cement Plc, FBN Holdings Plc, Forte Oil Plc and Oando Plc, amongst others. Similarly, the market capitalisation appreciated by 0.61 per cent to close at N11.69 trillion. The total value of the stocks traded on the floors of the NSE was N4.03 billion, up by 20.05 per cent from N3.35 billion traded the prior day. Market sentiment was slightly positive at the close of trading for the week last Friday as the NSE ASI rose by 0.07 per cent from its previous close. The green outcome was driven by price gains in Forte Oil Plc, Nigerian Breweries Plc, offsetting losses in Guaranty Trust Bank Plc and Guinness Nigeria Plc. At the end of trades, the benchmark TOP TEN BROKERS(BY VALUE) AS AT LAST FRIDAY BROKER VALUE % VALUE STANBIC IBTC STOCKBROKERS LIMITED 4,780,988,100.71 13.83 CSL STOCKBROKERS LIMITED 4,509,167,191.07 13.04 RENCAP SECURITIES (NIG) LIMITED 2,427,986,043.47 7.02 EFCP LIMITED 1,793,998,283.88 5.19 FBN SECURITIES LIMITED 1,765,249,661.64 5.11 CORDROS CAPITAL LIMITED 1,236,344,699.37 3.58 CARDINALSTONE SECURITIES LIMITED 1,020,619,904.58 2.95 CHAPEL HILL DENHAM SECURITIES LTD 1,020,351,327.79 2.95 PARTNERSHIP SECURITIES LIMITED 875,136,334.53 2.53 INVESTMENT ONE STOCKBROKERS INT’L LTD 710,669,211.52 2.06 20,140,510,758.56 58.25 TOP TEN BROKERS (BY VOLUME) AS LAST FRIDAY BROKER VOLUME %VOLUME CSL STOCKBROKERS LIMITED 434,373,611 10.51 STANDARD ALLIANCE CAPTL & ASSET MGT. LTD 398,139,374 9.63 GREENWICH TRUST LIMITED 296,614,616 7.18 STANBIC IBTC STOCKBROKERS LTD 272,571,519 6.59 FBN SECURITIES LIMITED 210,546,281 5.09 CORDROS CAPITAL LIMITED 202,861,551 4.91 CARDINALSTONE SECURITIES LIMITED 154,298,621 3.73 READINGS INVESTMENTS LIMITED 123,511,441 2.99 EFCP LIMITED 122,887,120 2.97 RENCAP SECURITIES (NIG) LIMITED 97,457,714 2.36 2,313,261,848 55.96 index closed at 34,439.52 points while market capitalisation added N8.61 billion to settle at N11.70 trillion. Market activity significantly declined as volume and value of trades dipped by 48.0 per cent and 65.4 per cent respectively. Consequently, 184 million units of shares valued at N1.39 billion were exchanged on the bourse. Market Turnover In all, 1.626 billion shares worth N14.426 billion in 20,124 deals were traded last week by investors on the floor of the exchange in contrast to a total of 1.584 billion shares valued at N20.151 billion that exchanged hands the previous week in 23,279 deals. The Financial Services Industry (measured by volume) led the activity chart with 1.289 billion shares valued at N9.741 billion traded in 10,522 deals; thus contributing 79.29 per cent and 67.52 per cent to the total equity turnover volume and value respectively. The Services Industry followed with a turnover of 76.626 million shares worth N97.927 million in 1,140 deals. The third place was occupied by the Consumer Goods Industry with 69.608 million shares worth N2.078 billion in 3,552 deals. Trading in the top three equities- United Bank for Africa Plc, Zenith Bank Plc, and FBN Holdings Plc, accounted for 754.043 million shares worth N6.223 billion in 3,699 deals, contributing 46.37 per cent and 43.13 per cent to the total equity turnover volume and value respectively. Also traded during the week were a total of 25,469 units of Exchange Traded Products (ETPs) valued at N3.339 million executed in 53 deals compared with a total of 1.388 million units valued at N31.490 million transacted the previous week in 47 deals. There was no bond traded this week under review. However, a total of 4,569 units of Federal Government Bonds valued at N4.966 million were traded the previous week in two deals. Gainers and Losers Meanwhile, the price movement chart of the NSE showed that a total of 30 equities appreciated in price during the week, lower than 32 equities of the preceding week. Forty-one equities depreciated in price, lower than 45 equities of the preceding week, while 122 remained unchanged higher than 116 equities of the preceding week. The top 10 gainers were: seven-Up Plc (N14.00), Forte Oil Plc (N10.22), Beta Glass Plc (N3.00), Unilever Nigeria Plc (N2.03), Conoil Plc (N1.90), Berger Paints Plc (93 kobo), University Press Plc (55 kobo), Neimeth (10 kobo), Caverton Plc (25 kobo) and Red Star Express Plc (22 kobo). On the other hand, the top 10 losers included: Total Nigeria Plc (N15.00), Glaxo Smithkline Plc (N9.80), ETI Plc (N2.93), Unity Bank Plc (39 kobo), Skye Bank Plc (33 kobo), Honeywell (49 kobo), May and Baker Plc (19 kobo), Learn Africa Plc (12 kobo), Rt Briscoe Plc (9 kobo) and Trans Nationwide Express Plc (10 kobo).
30 THISDAY • MONDAY, MAY 18, 2015 BUSINESSWORLD INSIDE BROAD STREET STATUS REPORT High Level of Unsatisfied Forex Demand Worries Analysts Obinna Chima A view of Lagos financial district Furore over Repayment of N100bn Mortgage Bond Obinna Chima With few days to the maturity of part of the federal government’s N100 billion mortgage bond, the significant drop in federal government’s revenue is threatening the redemption of the debt. Specifically, the total value of Series 3 of the bond that matures on May 24, 2015 is worth N24.56 billion. However, given challenges occasioned by the slump in crude oil prices that has continued to threaten policies and plans of government, there have been some issues around the repayments to the bondholders. According to findings, the Federal Mortgage Bank of Nigeria (FMBN), the Debt Management Office (DMO) and the Federal Ministry of Finance have continued to trade blame over who should be held liable for the five-year bond that was initiated in 2007 to ensure success of the sale of federal government’s non-essential residential houses in the Federal Capital Territory (FCT) to public servants. In 2007, the administration of former president Olusegun Obasanjo had initiated the debt instrument and the FMBN and its issuing house, had sold the first tranche of N26 billion same year. However, impressed with the outcome, Messrs FMBN SPV Issuer Limited in 2012 issued another N6 billion notes by way of private placement to qualified institutional investors. The Series 2 Fixed Rate Notes issued under the N100 billion Residential Mortgage Backed Securities Programme, which is sponsored by FMBN, was 100 per cent guaranteed by the Federal Government of Nigeria. The bonds have unconditional and irrevocable guarantee of the Federal Government, making investments in the securities virtually risk-free. A statement obtained on the transaction showed that “The Mortgage-Backed Bond was issued under Special Purpose Vehicles incorporated at Corporate Affair Commission, namely; FMBN SPV Issuer Limited, FMBN SPV Funding Limited and FMBN Mortgage Trustee Limited. These, it stressed are distinct entities from the FMBN, maintaining that it is wrong to say the bond is an FMBN bond. “Once the FGN Guarantee backing Series 3 is called, Series 2 will become due as provided by the Trust Deed because it will no longer have any credit enhancement support,” it added. The FMBN had argued that it neither MARKET INDICATOR sponsored nor guaranteed the transaction, and as such should not be held responsible or liable for the bond. It also stated that principal actors in the transaction noticed the mismatch, but the then minister of finance overlooked the lapses. But THISDAY recently reported that a directive conveyed through a letter dated 15th May 2015, addressed to the Minister of Lands and Housing, Mrs. Akon Eyakenyi, the Coordinating Minister for the Economy/ Minister of Finance, Dr. Ngozi Okonjo-Iweala had recommended that assets of FMBN be sold to offset the sum of N24.56 billion, which matures on 24th May 2015. The letter read in part; “I wish to recommend that Mr. President considers directing the Honourable Minister of Lands, Housing and Urban Development to direct the FMBN to raise funds to pay its maturing obligation of N24.564 billion on May 24, 2015, as it must forestall imposing a crisis on the economy.” The minister had also directed that FMBN should ensure remittance of N4.54 billion collected on its behalf by Aso Savings and Loans Limited, adding that the mortgage bank should immediately recover all the non-performing loans. “FMBN should ensure that Aso Savings and Loans Limited immediately remit the collections of N4.54 billion which it has failed to remit to the FMBN. FMBN to immediately recover all the non-performing loans, including the use of Foreclosures (where the C of Os’ of the properties are in the custody of the security trustees) of the assets of the defaulters, and take all necessary actions to ensure that the federal government guarantee does not crystalise.” The DMO had identified negative carry (interest rate subsidy), non-performing loans and non-remittance of collections as major challenges encountered by the bond transaction. Nevertheless, the Managing Director of FMBN, Gimba Ya’u Kumo had in a letter dated 29th April 2015, addressed to the DMO, had explained that the bond issuance programme was at the instance of the federal government. He had also added that the federal government’s guarantee that supported the bond transaction was between the federal government as the guarantor, and UBA Trustees Limited as the AKINWUNMI IBRAHIM Notes Trustees. “The bond was structured in consultation with the federal ministry of finance and the DMO, both the tenor and the interest mismatch were identified at the time but overlooked by the then minister of finance.” Kumo in the letter noted that the guarantee was irrevocable and unconditional, which according to him, requires the guarantor to make good its obligation in the event of default of shortfall. Some experts have described current events surrounding the bond repayment as unfortunate saying the development might have a dire consequence on the economy. They also noted that if the FMBN is made to pay the debt, it might affect the liquidity of the primary mortgage finance sub-sector. A statement quoted the President of Real Estate Developers Association of Nigeria (REDAN), Ugo Chime to have urged the federal government to redeem its guarantee on the Series 3 Bond and pay the N24.56 billion to the note holders. He added: “On this bond issue, we need to look at some aspects. Where is the money? Was it injected into the NHF? This money should have been used as seed fund to assist the Federal Mortgage Bank of Nigeria (FMBN) to make houses more affordable. “I don’t think that at a time when the government should be thinking of beefing up the capital base of FMBN it should be asking the bank to sell off its assets. It is gross dereliction of duty to the masses. This entire controversy is a distraction at this moment. “The federal government should pay the money that is due in a few days as this date has not come to them as a surprise. There are no assets for the FMBN to sell off to be able to meet the deadline, even if there were how many days will it take to do so and meet up with the deadline?” Chime said the government has used privatisation to remove safety nets from the common man and describes the bond controversy as another attempt to further make the common man suffer adding, “People are contributing 2.5 per cent to the National Housing Fund and over 90 per cent of these people cannot access the NHF loans due to poor funding by the same government. Government should live up to its responsibility as far as this bond issue is concerned.” The high level of unsatisfied forex demand in the interbank market has been highlighted as one of the problems of current level of divergence between the official and the parallel market forex rate. Analysts at FSDH Merchant Bank Limited, which noted this in their economic and financial market review for April 2015, released at the weekend, urged the Monetary Policy Committee (MPC) to address the situation at its May 2015, which commences today. This, they noted would allow the value of the naira trade at its equilibrium level, “which may mean additional depreciation in the value of the currency.” The report however showed that there was a noticeable temporary appreciation in the value of the naira at the interbank and parallel market segments of the forex market in April, due to the declaration and acceptance of the presidential elections as the palpable fears about a possible civil disturbance from the acceptance/rejection of the results was dissipated. “However, we note that there has been an increasing divergence between the inter-bank and parallel markets in recent time, which could fuel further speculative and rent seeking behaviour in the foreign exchange market. “The CBN is most likely uncomfortable with the increasing divergence and may introduce additional administrative foreign exchange measures to achieve convergence in the foreign exchange rates between the interbank and parallel markets at its next MPC meeting in May 2015. “The average exchange rate at the inter-bank market appreciated marginally by 0.04 per cent to stand at N199.12/$1 for the month of April 2015, while at the parallel market it appreciated by 5.96 per cent to N212.78/$1 in April 2015 from N225.47/$ in March 2015,” it added. Furthermore, an analysis of the liquidity situation in the money market and the fixed income securities market in April showed there was a net inflow of about N191.35 billion from various sources, compared with a net outflow of about N748.7 billion in March. “The major outflows in April 2015 were the open market operations (OMO) of about N933.74 billion, the primary Nigerian treasury bills of about N353.09 billion, the cash reserve requirement (CRR) debit of about N150 billion and the bond auction of about N70 billion. “Meanwhile, in the month of March 2015 the major outflow from the market was from the OMO of about N832.80 billion, the primary NTBs of about N520 billion, the CRR of about N245.20 billion, and the bond auction of about N91 billion. “The major inflows into the market in April were the matured OMO and REPO Bills of N671 billion, the bond maturity of about N535 billion, the NTBs of about N269 billion, and the Federation Account Allocation Committee injection of about N223 billion,” it revealed. CBN Governor, Godwin Emefiele
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