Report: Profit Taking Inevitable as Investors Mobilise End of Year Funds

As the prospect of higher returns on the back of growing investors’ confidence in the nation’s capital market rises, financial market watchers said the stage is set for profit taking by investors who are bent on taking advantage of the release of improved Q3‘ 2013 corporate earnings by a number of companies.
According to a report by a leading financial and economic advisory firm, Financial Derivatives Company Limited, “A look at the market‘s build up in activity and performance from the last two months to date would justify profit taking activity by investors.”
The company, in its monthly report for the month of November, believed that the activities of investors seeking to mobilise their gains especially to cope with end of the year finances, would downplay the anticipated gains from the nation’s capital market.
It said: “As we approach the last month of the financial year 2013, market performance would remain choppy as realised gains would be short-lived by profit takers.”
The report, however, predicted a bumper performance at the end of the month, which incidentally is also the end of the trading year, saying “decent gains are also anticipated as the outlook for the month remains promising. It is expected that the market would close the year on a higher note than its 32.5% return recorded in 2012.”
The month of November, according to the report, began with the market sustaining momentum from the previous month. “The ASI gained 3.06% to close the month at 38,920.85 points. The number of days of gains to losses was in the ratio 2:1 as the market closed on a positive note in 14 of the 21 trading days in the month. The year-to-date return on the index at the end of the month was 38.61%. Market capitalisation remained above the N12trn threshold to close at N12.45trn – despite the drop from N12.55trn.”
FDC’s report said the release of improved Q3‘13 corporate earnings by a number of companies was a major driver of market activity for the month.
This was also evident from the daily average turnover of N4.35bn compared to N3.52bn and N2.57bn recorded in October and September respectively.
“The decision of the Monetary Policy Committee (MPC) to retain the Monetary Policy Rate (MPR) at 12% for the 13th consecutive time, as well as the CRR on public sector deposits at 50% contributed immensely to market activity as investors found renewed interest in equities.
The growing investor confidence in the Nigerian capital market engendered by improved regulatory environment and improved financial results of listed companies led to a gain of N428 billion in Nigerian Stock Exchange (NSE) market capitalisation in November. The market capitalisation rose 5.56 per cent from N12.021 trillion at the beginning of November to N12.449 trillion at the end of the month, translating into a gain of N428 billion.
Measured by NSE All-Share Index (ASI), the market rose 3.45 per cent, from 37,622.74 to close at 38,920.85. Compared to October, the market recorded an improved performance in November as the market capitalisation added N368 billion. The index rose 2.84 per cent in October. Year-to-date, the market capitalisation of the exchange has chalked up N3.479 trillion, while ASI has grown by 38.6 per cent.
Market operators said given the average monthly growth of 3.5 per cent, the ASI is likely to close 2013 by about 40 per cent, as against 34.5 per cent recorded in 2012. Some investors have been reacting to the financial results of companies for the third quarter ended September 30, 2013, while others have been taking positions ahead of the bright prospects in the market.
Meanwhile, the Securities of Exchange Commission (SEC) has said that the nation’s capital market grew by 38.8 per cent in the current year, making it one of the fastest growing bourses globally.
The Director-General of the Commission, Ms. Arunma Oteh, who disclosed this, attributed the spike of the market primarily to regulatory guidelines and other measures by the commission to ensure transparency in the operations of the Nigerian Stock Exchange (NSE) among other factors.
Biometrics for Bank Customers
The Central Bank of Nigeria is to officially launch the 2nd phase of biometric details of all bank customers in the country come February 14, 2014. CBN Governor Mallam Sanusi Lamido Sanusi, who disclosed this, said the second phase would ensure full capture of biometric details of all banks’ customers nationwide in less than a year.
The project, according to him, is expected to provide a centralised platform through which banks might enrol and uniquely verify the identity of each customer through ‘know your customer, (KYC) purposes, perform credit checks, verify customer’s integrity and authenticate customers from a point of transaction device. At a time when the activities of the various credit rating agencies are yet to make the desired impact, the intervention of the apex bank through the biometric project will go a long way to engender confidence in banks.
Is Oil Money Missing?
The media space is awash with stories bordering on the allegation that Nigerian National Petroleum Corporation (NNPC) has not accounted for nearly $50bn in revenue from the sale of crude oil, which under the law should have been paid into government accounts.
Central Bank of Nigeria Governor Sanusi Lamido Sanusi had stirred the hornet’s  nest when he, in a letter to President Goodluck Jonathan, dated September 25, 2013, said the NNPC earned $65.3bn from crude oil sales between January 2012 and July 2013 but remitted only 24% of this to the federation account. He claimed that $49.8bn is still outstanding.
Although the rebuttal from NNPC was spontaneous, the import of Sanusi’s claim is not lost on Nigerians who expressed worry that it’s either there are scores to settle between the CBN and NNPC or some officials of government are just being mischievous and clever by half. The Federal Government should as a matter of urgency clarify the situation and ensure the two agencies reconcile the conflicting figures in the public space.
Political, Economic Stability
When former Head of Interim National Government Ernest Shonekan spoke of the need for political and economic stability as a precondition for tackling the challenge of unemployment among the teeming jobless youths, not a few Nigerians agreed with him.
For a man who was drafted to stabilise the polity following the crises that trailed the annulment of the June 12, 1993 election, Shonekan surely knows what it means to operate in an atmosphere of peace. That is why the onus is on the current administration to step up efforts at stamping out the insurgency going on in the Northern part of the country because, according to Shonekan, investors will continue to shun economies where political and economic stability is not guaranteed. Shonekan is right on point you might say.

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