The 1st Week of Extended Trading Hours & Its Impact on the NSM – December 10, 2010

The 1st Week of Extended Trading Hours & its Impact on the NSM

The extension of the NSE trading hours was implemented on December 6, 2010. Mr.
Emmanuel Ikhazoboh, the interim Director General of the Nigerian Stock Exchange (NSE),
disclosed to Reuters that the exchange’s motive of extending the trading hours was to
boost liquidity, as well as attract more foreign investments into the Exchange.

Kindly find below the summary of positions after the first week.

Extended Trading Hours SECTORAL TRACKER

Yr-Dec 3rd Vs Dec 6th -
Average (Dec 6, to Dec 10,2010) Average (Yr to Dec 3,2010) For Information Only Dec 10th
06-12-10 Volume Value
Volume Value (N'bns) Volume Value Volume Value (N'bns) Growth Growth
NSE stocks by Sectors

Units N Units N Units N Units N

1 BANKING 149,899,032.00 1,342,602,313.75 78,647,524.01 607,702,850.90 161,806,282.00 1,345,423,976.96 90.60% 120.93%
2 INSURANCE 46,021,801.80 32,617,029.44 16,884,707.90 14,763,873.49 79,764,749.00 55,548,856.57 172.56% 120.92%
3 CONGLOMERATES 6,085,650.80 98,852,238.80 5,539,243.62 58,141,272.19 1,521,745.00 29,213,524.21 9.86% 70.02%
FOOD/BEVERAGES & TOBACCO
4 13,603,290.80 431,796,732.93 5,036,788.88 144,457,520.17 11,845,286.00 6,474,044.29 170.08% 198.91%
5 MORTGAGE COMPANIES 13,949,759.40 7,936,420.71 3,213,812.05 2,099,046.98 10,936,857.00 6,474,044.29 334.06% 278.10%
6 ICT 3,277,208.60 5,392,878.11 3,196,310.66 4,744,592.80 1,744,999.00 3,183,063.01 2.53% 13.66%
7 BUILDING MATERIALS 5,986,229.20 268,474,106.32 3,039,036.14 203,121,605.74 4,022,980.00 209,526,218.15 96.98% 32.17%
8 MARITIME 4,307,464.60 5,592,668.17 2,580,202.59 3,230,590.23 4,725,983.00 6,126,037.09 66.94% 73.12%
9 PETROLEUM(MARKETING) 3,724,847.20 113,638,644.65 2,351,396.74 114,627,600.72 4,816,071.00 129,325,982.65 58.41% -0.86%
10 HOTEL & TOURISM 442,131.20 685,066.29 1,676,739.63 5,635,115.54 710,120.00 1,081,812.00 -73.63% -87.84%
11 SECOND-TIER SECURITIES 9,600.00 25,290.00 1,469,996.16 736,968.05 43,000.00 117,500.00 0.00% 0.00%
12 CONSTRUCTION 668,812.40 18,346,967.44 1,421,383.37 8,955,979.91 708,175.00 10,833,395.88 -52.95% 104.86%
13 BREWERIES 1,996,510.00 174,612,190.61 1,372,509.41 104,793,323.11 3,195,205.00 293,754,355.90 45.46% 66.63%
14 AGRICULTURE 4,050,790.00 7,830,365.01 1,316,766.76 3,232,343.40 12,721,599.00 32,822,848.95 207.63% 142.25%
15 AIRLINE SERVICES 687,944.60 5,354,504.74 1,310,275.10 5,707,317.51 1,002,527.00 8,346,939.77 -47.50% -6.18%
16 HEALTHCARE 1,646,700.40 6,839,825.85 1,081,370.00 4,078,466.24 664,136.00 6,501,400.78 52.28% 67.71%
THE FOREIGN LISTINGS
17 8,098,238.60 128,773,605.73 1,014,911.41 16,282,005.13 4,140,288.00 64,205,669.88 697.93% 690.90%
18 AUTOMOBILE & TYRE 724,676.80 1,804,250.75 955,363.42 3,130,390.86 420,389.00 1,139,551.09 -24.15% -42.36%
19 ROAD TRANSPORTATION 41,140.00 22,951.60 748,932.83 405,641.59 300.00 180.00 -94.51% -94.34%
20 INDUSTRI/DOM. PRODUCTS 1,251,068.00 4,869,751.36 708,155.25 1,875,664.59 502,142.00 3,107,090.14 76.67% 159.63%
21 PACKAGING 1,037,693.80 2,164,936.55 663,817.94 1,565,499.08 2,166,846.00 4,403,708.64 56.32% 38.29%
22 COMMERCIAL/SERVICES 195,331.60 554,904.57 485,090.06 1,010,433.84 180,188.00 517,339.56 -59.73% -45.08%
23 OTHER FIN. INST. 804,335.00 442,329.80 374,965.10 201,280.78 803,447.00 451,099.98 114.51% 119.76%
24 COMPUTER & OFFICE EQUIP. 783,590.60 426,681.88 343,724.62 203,128.72 113,962.00 161,360.16 127.97% 110.05%
25 MEDIA 108,400.00 56,692.00 212,850.09 123,622.50 69,000.00 35,260.00 -49.07% -54.14%
26 LEASING 347,156.20 597,755.17 206,214.27 517,935.06 23,833.00 41,364.43 68.35% 15.41%
27 PRINTING & PUBLISHING 133,126.40 829,549.88 189,577.73 1,336,832.54 81,820.00 516,281.00 -29.78% -37.95%
28 CHEMICAL & PAINTS 205,589.80 3,241,914.54 167,836.38 1,741,968.02 151,493.00 1,502,282.87 22.49% 86.11%
29 REAL ESTATE 102,526.00 1,673,096.70 86,618.16 1,666,153.31 65,197.00 1,079,507.51 18.37% 0.42%
ENGINEERING TECHNOLOGY
30 379,239.60 680,108.11 61,073.15 102,350.84 230,656.00 518,578.86 520.96% 564.49%
31 TEXTILES 23,808.20 18,055.60 15,780.66 13,109.73 15,595.00 11,696.25 50.87% 37.73%
32 REAL ESTATE INVESTMENT TRUST 6,680.00 428,010.00 4,584.35 322,560.59 5,200.00 520,000.00 0.00% 0.00%
TheNSE ASI 24,630.25 24,733.56 24,785.56 -0.42%
Source: Proshare Research Group

Although it is too premature to judge the success of the extension, it is however pertinent
to perform a cursory review of what impact the first week of the extension had on the
market. This is essential in order to assess the rationale, thinking and expectation in picking
the start-off date vis-à-vis the expectation expressed.

A caveat though - it is important to state that this article does not seek to represent that, in
the long-run, the extension may/will not work. The article is relevant though to all extent as
the first week have shown that the extension is not the ‘ace in the pack’ – that primary
factor that will get the NSE out of its current morass.

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 The 1st Week of Extended Trading Hours & Its Impact on the NSM – December 10, 2010

Let us look at a few facts:

The NSE All Share Index (ASI)

In a week when the NSE increased the trading hours by two (2) hours, giving traders an
additional 10 hours of trading time for the week ended December 10, 2010, the All Share
Index (ASI) lost 362 or 1.5% as shown in the graph below:

Two (2) WeeksAll NSEShare Index Trend

25,000.00
24,900.00
24,800.00
24,700.00
24,600.00
24,500.00
24,400.00
24,300.00
24,200.00
24,100.00
11/ 29/2010
11/ 30/2010

12/ 10/2010
12/1/ 2010
12/2/ 2010
12/3/ 2010
12/4/ 2010
12/5/ 2010
12/6/ 2010
12/7/ 2010
12/8/ 2010
12/9/ 2010

SECTORAL INDEXES TREND FOR THE DAY

Index % Change
Today - Index Last % Change Previous
Dec 10 '10 Week this week week
NSE-30 1,045.48 1,068.09 -2.12% 0.94%
NSE-Food 773.58 804.54 -3.85% 0.91%
NSE-Banking 377 383.91 -1.80% 0.39%
NSE-Insurance 156.72 160.58 -2.40% -0.85%
NSE- Oil& Gas 333.68 334.66 -0.29% -2.55%
Source: Proshare Research Group

In monetary terms the All Share Index (ASI) lost N65.7 billion for the week, and a
review of three sectors (Banking, Breweries, and Building Materials) revealed that of the
twenty eight (28) listed stocks in the three sectors, only six (6) stocks reflected minor
gains for the week as highlighted in the schedule below:

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 The 1st Week of Extended Trading Hours & Its Impact on the NSM – December 10, 2010

Price %
10 - D e c - 10 0 3 - D e c - 10 Change Change
BANKING
A CCESS 9.39 9.45
-0.06 -0.6%
A FRIB A NK 2.33 2.65
-0.32 -12.1%
DIA M ONDB NK 7.29 7.64
-0.35 -4.6%
ECOB A NK 3.6 3.78
-0.18 -4.8%
FCM B 7.5 7.62
-0.12 -1.6%
FIDELITYB K 2.6 2.64
-0.04 -1.5%
FIRSTB A NK 12.5 12.52
-0.02 -0.2%
FIRSTINLND 0.72 0.82
-0.1 -12.2%
GUA RA NTY 17 16
1 6.3%
IB TC 9.1 9.06
0.04 0.4%
INTERCONT 2.25 2.2
0.05 2.3%
OCEA NIC 2.55 2.53
0.02 0.8%
P LA TINUM 1.85 1.91
-0.06 -3.1%
SKYEB A NK 7.92 8.23
-0.31 -3.8%
SP RINGB A NK 0.89 1.04
-0.15 -14.4%
STERLNB A NK 2.15 2.16
-0.01 -0.5%
UB A 8.43 9
-0.57 -6.3%
UB N 4.45 4.43
0.02 0.5%
UNITYB NK 1.17 1.25
-0.08 -6.4%
WEM A B A NK 1.18 1.35
-0.17 -12.6%
ZENITHB A NK 14 15.14
-1.14 -7.5%
BREWERIES
GUINNESS 180.25 177
3.25 1.8%
INTB REW 6 6
0 0.0%
NB 77 79
-2 -2.5%
BUILDING MATERIALS
A SHA KA CEM 25.01 26.1
-1.09 -4.2%
CCNN 12.5 13
-0.5 -3.8%
DA NGCEM 123.49 123.11
0.38 0.3%
WA P CO 40.5 41.5
-1 -2.4%

Pre & Post Extension of Trading Hours Volume Comparison

For the week ended December 3, 2010, the combined five (5) days trading volume at the
NSE was 1,192,384,466, but for the week ended December 10, 2010 (i.e., 1st week of the
extension of trading hours), the combined five (5) days trading volume at the NSE was
1,353,436,718.

Reviewing both weeks (i.e., the last week of pre-extension trading period and the first week
of the extended trading era), the first week of the extension era showed an increase of
161,052,252 or 14% in trading volume.

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 The 1st Week of Extended Trading Hours & Its Impact on the NSM – December 10, 2010

Averaging the increase in trading volume for the week, translates to approximately 32.2
million shares traded per day more than the prior week. The trend of daily trading
volume for the last two (2) weeks of trading is highlighted below:

Although, some traders/brokers and NSE administrators who proposed and support the
extended trading hours might be fast to note that the increase in the daily trading
volume during the first week of the extension is a sign of success. However, if you review
the average daily trading volume for the last 30 days prior to the implementation of the new
trading hour, it shows that the daily trading volume was approximately 364million
exceeding 270.6million, the average dailing trading volume for the first week of the
extension.

Conclusion
As previously noted, although it is too early to judge the success or otherwise of the trading
hour’s extension based on only the first week of trading, but it is obvious that the
trading volume, price trend and All NSE share value and index were not positively
impacted by the extension.

Liquidity
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00% Liquidity
4.00%
2.00%
0.00%
4-Jun- 4-Jul-10 4-Aug- 4-Sep- 4-Oct- 4-Nov- 4-Dec-
10 10 10 10 10 10

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 The 1st Week of Extended Trading Hours & Its Impact on the NSM – December 10, 2010

We believe that the NSE should have worked on improving the liquidity of the
exchange before extension of trading hours.

In an article written by Dr. Chukwumah Biosah in November 2009 “Creating Liquidity for the
Nigerian Stock Market” he listed some measures that should be taken to improve liquidity at
the exchange.

Volatility
2.50%

2.00%

1.50%

1.00%
Volatility
0.50%

0.00%
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Additional Reading
Extract of the November 21, 2009 contribution to the market:

…the book “Trim Tabs Investing by Charles Biderman” looks at the stock market in
terms of volume of shares, their overall price, and the money chasing those shares. Mr.
Biderman believes that market liquidity is impacted by four factors:

Insider and corporate trading

General investor trading
Foreign investor trading
Margin debt

In the short term the money from general investors can influence the direction of the stock
market. However, funds from the general investors is not sufficient to have a lasting
impact on the market, because considering the current float for listed companies in the
NSE, it is doubtful that funds from regular investors is sufficient to make a significant impact
on the market direction.

Additionally, most investors are emotionally attached to their investments, and tend to
believe the future actions of the stock market will follow the recent past. Since the recent
past has been nothing short of dismal for most investors, it will be difficult to convince these
investors to get back into the market without any indication of significant upward movement
for shares.

Infusion of cash from foreign Investors (primarily institutional investors) partially

contributed to the significant growth that was experienced by the Nigerian Stock market
prior to March 2008. However, the global financial crisis forced most of these foreign
investors to divest the funds they invested worldwide including investments in the Nigerian
Capital Market. The divestiture of these funds contributed to the downtrend of the Nigerian
Stock market. Although, there has been investment resurgence by foreign investors and

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 The 1st Week of Extended Trading Hours & Its Impact on the NSM – December 10, 2010

hedge funds into developing markets, the current situation in Nigerian regarding the
scandals in the banking sector and the ‘controversy riddled NSE/SEC has made our capital
market very unattractive to some of these foreign institutional investors to return.

Another factor that brings in liquidity to the stock market is the availability of margin
loans to investors. It is an open secret that excessive margin loans from banks to
investors and brokerage firms contributed to the precipitous rise in stock prices experienced
by the shares of most listed companies in the NSE. The lack of stringent criteria for
providing margin loans and subsequent monitoring of these loans is a contributory factor for
the large impaired margin loans currently on the books of most banks in Nigeria. Since
these non-performing margin loans are partially to blame for some of the problems of the
banking industry, it is unlikely that most banks will be willing to offer investors or brokerage
firms such margin loans that mirrors the past in the near future. Therefore, this possible
source of liquidity for the Nigerian stock market is very uncertain.

Typically, Insiders funds are another source of market liquidity, because these
insiders usually absorb any excess shares in circulation at prices below their fair
value to prevent any further downtrend. For example, at the peak of the Nigerian stock
market boom, banks accounted for 65% of the market. The banks and their investment
subsidiaries were very active participants in the market. As insiders they had access to
“better or the real” data and their actions were thus inclined to be more representative of
actual market conditions. Additionally, their ability to control the float (number of shares on
the market) gave them an unfair advantage. However, most of these financial institutions
were taken unawares because they believed their own hype and were too late to react to
the market realities. As a result they were also hurt by the market downtrend, as they were
unable to sell their shares because the downward spiral of share prices resulted in investors’
retrenchment. Since these banks have been bitten by the “gods of the stock market” most
of them will be very cynical about becoming active participants in the market in the near
future, thereby freezing another important source of liquidity.

Conclusively, it appears that it will be a very difficult challenge to generate liquidity from
most of the aforementioned traditional sources of liquidity. Therefore, it appears that the
CBN, SEC, NSE and the Federal Government have their work cut out for them.

Bold measures have to be taken to directly address the problems of the NSE (which includes
lack of transparency, one directional market, inability of investors to sell their
shares during market decline, bloated outstanding shares for several listed
companies, etc).

Additionally, the CBN has to show domestic and international investors that they are serious
about the banking reforms not just business as usual. If some of these problems are
corrected, investors will regain the confidence in the market and return to the NSE and in-
turn improve the liquidity of the NSM.

Prepared by Proshare Research with commentaries by Dr. Chukwumah Biosah, President CEBAL Audit Group, USA and InvestIQ,
Technical Analysts to Proshare. All opinions on this page/site constitute our best estimate judgement as of this date and are subject
to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment
decision. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All
enquiries should be directed to Biosah@ca.rr or info@proshareng.com

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