Business
Nestle, Cadbury, 2 others suffer N422bn loss in 10 trading sessions
…Represents 24% of N1.78trn Market Capitalisation loss
By Chioma Obinagwam
Investors in the shares of Nestle Nigeria, Cadbury Nigeria, Nigerian Breweries Plc and Guinness Nigeria Plc have recorded a total of N422 billion loss within 10 day activities trading sessions since the new year in 2016.
However, the loss translates to an average of 24 per cent average depreciating value of the N1.78 trillion lost in market capitalization within the period under review.
A breakdown of the losses show that, investors of Nestle Nigeria have lost N95.1 billion when its share price dropped by 14 per cent or N119.95 from N860 it opened in 2016 to N740.05 as at January 15, 2016.
The nation’s macro economic challenges, coupled with dwindling global oil prices propelled shareholders towards profit-taking, which saw high capitalised stocks on the Nigerian Stock Exchange (NSE) as its biggest victims.
Profit taking is an action by short-term securities traders to cash in on gains created by a sharp market rise, which pushes prices down temporarily. However, technical analysts see it as a signal of an uptrend.
Similarly, shareholders of Cadbury Nigeria shed a total of N7.2 billion within 11 days trading transactions in 2016 as its share price moved from N17.15 to N13.3 on last week Friday.
More so, shareholders of Nigerian Breweries Plc and Guinness Nigeria Plc incurred a loss of N310 billion and N9.65 billion respectively.
These companies, are known for huge foreign investors’ patronage in their shares and the current price decline, according to analysts is a reflection of the recession going on in the global capital markets.
It was revealed that weak corporate earnings in nine-month unaudited accounts that ended September 2015 also contributed to surge profit-taking by investors
Chief Executive Officer, Finawell Capital, Mr. Tunde Oyekunle, said the Federal Government indecisive economic blueprint and global economic challenges have continued to impact negatively on listed multinationals and domestic shares on the Nigerian bourse.
“The capital market globally and Nigeria peculiar problems have impacted negatively on the capital market at large. Since the new government came in, we have not seen any strong policy direction from the government,” he noted
“The policies from Central Bank of Nigeria (CBN) are counterproductive which is affecting the nation’s economy and investors at large. The foreign exchange policy introduced by CBN of recent is not favorable to investors especially the foreign investors. With bad policies from the government position, domestic investors have lost money in the capital market,” he stated.
“Nine-month corporate earnings of Nestle Nigeria, Cadbury Nigerian Breweries Plc and Guinness Nigeria Plc were bad and it is expected for investors to sell-off.
“Most of these shares are currently traded below their intrinsic value and yet investors are not buying. It is an indication that there is a problem with our national economy which government has to tackle by introducing new policies needed to drive economy activities,” he continued.
The President, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, explained that the decline in listed companies share prices does not mean they are closing businesses but based on global economic challenges.
He urged the management to stay focused despite the severe macro-economic policies by Federal government and Central Bank of Nigeria(CBN).
The PSAN boss reiterated need for domestic investors to utilize the decline in share prices and invest in the capital market.
The Chief Executive Officer, NSE, Mr. Oscar Onyema, also disclosed in a recent press briefing that 2016 would be a challenging year for the capital market and the nation’s economy at large.
Onyema while addressing questions from Journalist at the ‘NSE 2015 Market Recap and Outlook for 2016’ event held in Lagos disclosed that trend is likely to continue amid weakening oil and other commodity prices.
The NSE boss noted that uncertainty and volatility have dominated the forecast for the current year as the nation’s struggles with commodity price shocks and the resultant impact on the naira.
According to him, the performances of the market indices are reflections of scenarios in the wider economy, but pointed out that the current state of the market was creating challenges as well as opportunities for new investors.