Investors Dump 40% Stocks Over Poor Corporate Governance
Amid domestic and global macro-economic challenges, investors on the Nigeria Stock Exchange (NSE) in 2017 deserted nearly 40 per cent stocks over poor corporate governance policy and poor performance on the bourse.
Investigations revealed that, while some stocks deprecated in prices, these 40 per cent stocks were not traded, remaining at the same price for the second consecutive year.
It was learnt that Investors dumped stocks in the Information Processing companies, including Chams Plc, E-Tranzact International Plc, Courteville Investments Plc, Media/Entertainment, Daar Communications and Other Financial Institutions, Deap Capital Management & Trust Plc.
Since becoming moribund, investors have decided not to trade Dunlop (Nigeria) Plc and FTN Cocoa Processors Plc. Others are Evans Medical Plc, Omatek Ventures Plc, Premier Paints Plc and R. T. BRICOE (NIG.) Plc, among others.
Although NSE has over 170 stocks, investigation revealed that nearly 60 stocks remained flat between 2016 and 2017.
The banking stocks in 2017 benefited from the Central Bank of Nigeria (CBN) foreign exchange interventions and stable growth in global oil prices, while the Industrial companies also reaped earnings from federal government spending on infrastructures.
Investors on the Stock Market in 2017 gained 43.34 per cent of their investments given the growth in NSE All-Share Index (ASI) that has appreciated to 38,522.14 basis points in 2017 from 26,874.62 basis points it opened this year.
The market growth has been driven by surge trading on some blue chip companies, including Dangote Cement Plc, Nestle Nigeria Plc, Guaranty Trust Bank Plc, Zenith Bank Plc and Presco Plc.
For instance, the price of Dangote Cement appreciated by 37.9 per cent or N66.00 to close last week at N240, while Nestle Nigeria price has added 82 per cent or N665 to close at N1,475.00 per share.
Prices of the likes of Guaranty Trust Bank and Zenith Bank have gained 63 per cent or 72.9 per cent to close at N40.50 and N25.50 respectively.
A total of four, out of eight stocks on NSE ASeM Index, remained flat in 2017 as most companies struggled to grow earnings and expand businesses. The four companies whose prices remained unchanged are Afrik Pharmaceuticals Plc, Anino International Plc, Capital Oil Plc and Juli Plc.
The NSE Insurance Index might have gained 9.99 per cent this year but the growth has been driven by majorly two insurance companies out of the 20 listed insurance companies on the Exchange.
Two stocks that have been driven by the NSE Insurance Index are AxaMansard Insurance Plc and N.E.M Insurance Co. (Nig) Plc.
Over 18 Insurance stocks were dumped by investors, as their prices remained flat (N0.50) for the second consecutive year. Prices of companies like Cornerstone Insurance Plc, Equity Assurance Plc, Great Nigeria Insurance Plc, Goldlink Insurance Plc, Guinea Insurance Plc, Consolidated Hallmark Insurance Plc, Lasaco Assurance Plc, Mutual Benefit Assurance Plc, Niger Insurance Co. Plc., Prestige Assurance Plc, and Regency Alliance Insurance Company Plc remained flat.
Others are Royal Exchange Assurance Plc, Sovereign Trust Insurance Plc, Standard Trust Assurance Plc, Standard Alliance Insurance Plc, Unic Insurance Plc, Unity Kapital Assurance Plc and Universal Insurance Company Plc. They closed for the second consecutive year at N0.50 per share.
Weak earnings stocks thus witnessed profit-taking this year as investors continued to trade with caution not to lose their investment.
The Managing Director of APT Securities Limited, Mr. Garba Kurfi explaines that investors in the capital market are wiser with their investment, noting that investors are interested in performance of listed stocks.
He said, “The present growth in the capital market is driven by foreign investors that do not trade in penny stocks. Foreign investors’ trade stocks with impressive fundamentals but if a stock proves to have fundamental, they trade those stocks.
“Take for instance, C & I Leasing was trading as low as N0.50 but today, C & I has risen to N1.32. The company has delivered good turnover and good performance. Investors in the capital market are wiser now and it takes only one performance to grow a particular stock.”
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