Business

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.
 
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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.
 
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