Investors lose N2.18tn as NGX extends decline amid T+1 settlement adjustment

The stock market extended its negative trend on Thursday,  wiping out N2.179 trillion from investors wealth.

The decline was driven by sell-offs in fundamentally strong stocks as investors adjust to the new T+1 settlement cycle.

Market capitalisation declined by 1.41 per cent, falling from N154.445 trillion to N152.266 trillion, reflecting a loss of N2.179 trillion within the review period.

Similarly, the All-Share Index (ASI) dropped by 3,397.80 points or 1.41 per cent, closing at 237,404.92 compared to 240,802.72 recorded at the beginning of the downturn.

Consequently, market’s Year-to-Date (YTD) return erased to 52.56 per cent while the market breadth closed negative with 40 decliners against 13 advancers.

Cadbury, Africa Prudential and Triple Gee led the losers’ chart by 10 per cent each, finishing at N62.10, N11.70 and N3.60 per share respectively.

Similarly, John Holt declined by 9.93 per cent, closing at N12.25 and Mc Nichols shed by 9.33 per cent, settling at N6.80 per share.

On the other hand, Legend Internet topped the gainers’ chart by 9.52 per cent, closing at N5.75, NPF Micro-finance Bank followed by 9.18 per cent, ending the session at N5.35 while Transcorp grew by 7.32 per cent, settling at N44 per share.

Also, Neimeth Pharmaceuticals gained by 7.03 per cent, finishing at N9.90 and Daar Communications increased by 5.29 per cent, closing at N1.79 per share.

Market activity improved, with total traded volume rising by 4.33 per cent to 691.64 million shares valued at N116.85 billion in 50,025 transactions.

FirstHoldco led the volume chart with 115.84 million shares, accounting for 16.75 per cent of total transactions while Dangote Cement topped the value chart with trades worth N83.39 billion, representing 71.37 per cent of the day’s turnover.

Meanwhile, Wyoming Capital and Partners attributed the recent bearish trend in the stock market to investors’ adjustment to the new T+1 settlement cycle introduced by the Nigerian Exchange Ltd.

Chief Executive Officer of the company, Mr Tajudeen Olayinka, said this was driven by temporary challenges faced by traditional institutional investors in adapting to the shortened settlement period.

The News Agency of Nigeria reports that the Nigerian Exchange Ltd. moved to a T+1 settlement cycle on June 1, meaning that securities transactions are now officially completed one business day after the trade date.

Olayinka said many of the stocks experiencing significant price declines were predominantly held by traditional investors who were accustomed to the former T+2 settlement regime.

He explained that under the previous arrangement, investors had an additional day to arrange funds and complete post-trade settlements, a flexibility that no longer exists under the T+1 framework.

“Traditional investors are trying to reposition themselves in terms of how to deal with the T+1 settlement cycle.

“Before now, the extra day gave them the latitude to arrange funds and complete settlements after trades had been executed,” he said.

Olayinka noted that the new arrangement required investors to prefund transactions, a development that had made some institutional investors cautious about participating actively in the market.

“Most traditional investors do not like to leave money with brokers before trades are executed.

“They prefer to pay after the transaction has been completed. Now, they have to send funds ahead of the transaction, and that is creating temporary challenges.

“People are not necessarily selling because they want to take profits. The buy side is simply not there at the moment,” he said.

The capital market expert dismissed suggestions that investors were selling equities to raise funds for upcoming public offers or other investment opportunities.

According to him, such assumptions were misplaced because investors can liquidate holdings whenever they need liquidity rather than holding cash in anticipation of future transactions.

He expressed confidence that investors would eventually adapt to the T+1 cycle and resume normal trading activities.

“This is not a major setback for the market. It is merely a temporary adjustment. Over time, investors will find ways to manage the settlement process and the market will stabilise,” he said.

NAN