Stock market records N411m liquidity drop in August, September

With a turnover of 1.83 billion shares worth N10, 300 billion in 16,222 deals traded at the weekend on floor of the Nigerian Stock Exchange by investors, Nigeria stock market recorded a drop in liquidity to the tune of N411m between August 12 and September 9, 2016.

As of September 9, the financial services industry (measured by volume) led the activity chart with 1.015 billion shares valued at N7.136bn traded in 11,012 deals; thus contributing 85.83 per cent and 69.28 per cent to the total equity turnover volume and value respectively.

Trading in the top three equities namely – United Bank for Africa Plc, Guaranty Trust Bank Plc and FBN Holdings Plc (measured by volume) accounted for 444.004 million shares worth N4.958bn in 4,153 deals, contributing 37.53 per cent and 48.13 per cent to the total equity turnover volume and value, respectively.

However, as of August 12, the financial services industry (measured by volume) led the activity chart with 1.237 billion shares valued at N7.913bn, traded in 9,544 deals; thus, contributing 90.87 per cent and 73.88 per cent to the total equity turnover volume and value, respectively.

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The conglomerates industry followed with 46.182 million shares worth N77.192m in 637 deals. The third place was occupied by the consumer goods industry with a turnover of 38.102 million shares worth N1.372bn in 2,907 deals.

Trading in the top three equities namely – Wapic Insurance Plc, FBN Holdings Plc and Guaranty Trust Bank Plc (measured by volume) accounted for 666.721 million shares worth N5.064bn in 3,205 deals, contributing 48.99 per cent and 47.27 per cent to the total equity turnover volume and value, respectively.

Share turnover is a measure of stock liquidity calculated by dividing the total number of shares traded over a period by the average number of shares outstanding for the period. Thus, the lower the share turnover, the less liquid the shares of companies quoted on the Exchange and vice versa.

To this end, the President and Chairman, Governing Council of the Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, the direction of the capital market at any given time was a reflection of the economy and “it’s been known that the economy has not been doing too well lately. In this regard, it is even the best time to invest in the capital market because once the economy gets better, the capital market will recover as well.”

Some of the factors that draw investors into the capital market, according to him, are positive expectation about the economy; adequate and positive information about the market; security of investment; good returns in the form of dividends and / or capital gains, and favourable government policies.