Wednesday, April 16, 2014

Nigeria Stock Exchange undertakes year-end review of Market Indices

Published:

Nigerian Stock Exchange Trading floor [Photo: blogs.cfr.org]

The Nigeria Stock Exchange does the review twice a year.

As part of year-end activities, the Index Committee of The Nigerian Stock Exchange (NSE) has undertaken a pseudo-review of The NSE 30 Index and other Sectorial Indices, and has released the names of the likely incoming and exiting equities.

According to the exchange, barring unforeseen circumstances, the composition of the indices will become effective on Wednesday, January 2, 2013.

The pseudo review of NSE 30 and Sectorial Indices, which is done twice yearly, in June and December, is a run-up to the actual review to be undertaken at respective month ends.

The Committee recommended that the number of stocks comprising the NSE Consumer Goods Index be increased from 10 to 15; NSE Insurance Index be increased from 10 to 15; while the NSE Oil/Gas Index will have 7 stocks as against the current 5.

The NSE 30 Index and the NSE Banking Index retain their 30 stocks and 10 stocks respectively. As the Committee explained, this is to allow for adequate portfolio diversification.

The breakdown of the likely composition of the indices shows that the NSE 30 Index may have Glaxo Smithkline Consumer Plc; Union Bank of Nigeria Plc; International Breweries Plc; Julius Berger Nigeria Plc; 7-UP Bottling Co. Plc and Sterling Bank Plc as likely incoming stocks while Law Union & Rock Ins. Plc; Transnational Corporation of Nig. Plc; National Salt Co. of Nig. Plc; Oando Plc; Dangote Flour Mills Plc; and Mobil Oil Nigeria Plc are listed as likely exiting stocks.

Under the NSE Consumer Goods Index, the following stocks are listed as likely incoming: International Breweries Plc; National salt; Honeywell Flour Mills Plc; Vitafoam Plc; UTC Plc; Multi-Trex Integrated Foods Plc and Northern Nig. Flour Mills Plc while 7-Up Bottling Plc; Cadbury Nigeria Plc; Dangote Flour Mills; Unilever Nigeria; PZ Cussons Nigeria Plc; Dangote Sugar Refinery Plc and Flour Mills of Nigeria Plc are listed as likely exiting.

The NSE Banking Index has Union Bank; Diamond Bank; Sterling Bank Plc; Unity Bank Plc and Wema Bank Plc as likely incoming while FBNH; Stanbic Holdco; Fidelity Bank Plc; First City Monument Bank Plc and Skye Bank Plc are listed as likely exiting.

Niger Insurance Plc; Cornerstone Insurance Plc; Standard Alliance Ins. Plc; Lasaco Assurance Plc; Sovereign Trust Insurance Plc; Linkage Assurance Plc and Prestige Assurance Plc are in the stocks listed as likely incoming stocks for the Insurance Index; while Unity Kapital Assurance Plc; Mutual Benefits Assurance Plc.; Goldlink Insurance Plc; Aiico Insurance Plc; Wapic Insurance Plc; Continental Reinsurance Plc and Mutual Benefits Assurance Plc are listed as likely exiting stocks.

The NSE Oil/Gas Index has MRS Oil Nigeria Plc; Japaul Oil & Maritime Services Plc; Eterna Plc; Beco Petroleum Products Plc listed as likely incoming stocks while Forte Oil Plc; Conoil Plc; Mobil Nigeria and Oando Plc are listed as likely exiting stocks.

The Nigerian Exchange began publishing The NSE 30 Index in February 2009 with index values available from January 1, 2007.

On July 1, 2008, the NSE developed four sectorial indices with a base value of 1,000 points, designed to provide investable benchmarks to capture the performance of specific sectors. The sectorial indices comprise of the topmost capitalized and liquid companies in the sector.

With a 32 per cent return YTD, the equity market has shown signs of recovery in 2012, according to Bismarck Rewane, Managing Director, Financial Derivative Company (FDC).

“The All share index is one of the performing frontier markets. Returns inclusive of dividend is above 40 per cent Year To Date (YTD). The market is still over 50 per cent shy of the 2008 peak. The Nigeria market is the only market yet to recover. Steps taken by the regulators in the past have contributed to the slow recovery” he said.

According to Mr. Rewane, questions have been raised whether the current trend can continue or whether another bear market lies just ahead.

“Accurately, predicting the direction of the stock market is a hopeless task” he said.

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