Airtel Africa loses N752 billion in market valuation in one week

Airtel Africa Plc, one of the major telecommunications companies quoted on the Nigerian Exchange (NGX) recorded a loss of N752 billion at the end of weekly trading to rank among the top losers of the week, following sustained sell pressure witnessed on the stock. 

Checks by Nairametrics show that the telecoms company’s stock dropped by 10% to N1,800 per share, from N2000, which was the opening figure for the trading week. 

The market opened for four trading days this week as the Federal Government of Nigeria declared Monday 3rd October 2022 a Public Holiday to mark the nation’s 62nd Independence Anniversary. 

Share price drop

The NGX All-Share Index depreciated by 3.41% to close the week at 47,351.43 while Market Capitalization depreciated by 2.50% to close at N25.791 trillion. 

• Similarly, all other indices finished lower, with the exception of the NGX ASeM, NGX Growth, and NGX Sovereign Bond indices, which closed flat.
• Eleven equities appreciated in price during the week, lower than twenty-five equities in the previous week. Forty-six equities depreciated at a price higher than thirty-three in the previous week, while one hundred equities remained unchanged, higher than ninety-eight equities recorded in the previous week.
• The market sentiment for the telecom firm has remained very low amidst buy-interests and sell-offs as bears dominated proceedings during the period under review following the build-up to the 2023 general election and interest rate hike.

Airtel Africa

Checks by Nirametrics reveal that Airtel Africa closed its last trading day (Friday, October 7, 2022) at N1,800 per share and N6.764 trillion in market capitalization on the Nigerian Exchange (NGX) as against N2,000 per share and N7.516 trillion in market capitalization at the beginning of trading on October 4, 2022, falling N752 billion or 10% week to date. 

• Airtel’s loss of N752 billion in market valuation is larger than the market valuation of GTCO and Zenith Bank which both trade less than N700 billion.
• Among other top losers include Nascon Allied Industry Plc, which shed 13.64% to close at N9.50 per share from N11.00, Presco Plc with a loss of 9.99% to close at N128.35 per share from N142.60 per share, and Okomu Oil Plc that dropped by 9.98% to close at N169.50 per share from N188.30 per share among other losers.

What analysts are saying

Analysts at CardinalStone Partners Limited noted that the build-up to the 2023 election will keep foreign investors at bay and throw up more financial account-related concerns.

• The analysts, while commenting on the state of the nation in their 2022 mid-year outlook themed: ‘Same Challenges, New Shocks’ argued that pre-election year concerns and fears of negative pass-through to inflation will likely limit the magnitude of currency adjustment made at the official market in the current year.
• According to them, akin to the trend witnessed in emerging and frontier markets, Nigeria was also mostly unappealing to foreign capital providers in H1’22.
• They attributed the sentiment to geopolitical uncertainties and hawkish rendition from global central banks.

In addition to these global factors, they pointed out that the lack of market-reflective FX rates, illiquidity, and a backlog of uncleared foreign exchange demand dampened investors’ sentiments.

• Mr. David Adonri, executive vice chairman, of Hicap Securities Limited, said “Right from the penultimate year to the election, the socio-political atmosphere becomes charged. Politicians resort to violent rhetoric and divisive tactics which deepen the country’s socio-political fault lines, in order to establish a competitive edge. During this period, the economy becomes overloaded with money arising from excessive election spending which spikes inflation.
• Historical antecedents indicate that on average, both equities and bonds show positive or negative performance in the penultimate year and immediately after the election. While the drama of general elections can make your imagination run wild, what you need to watch out for is how the unfolding scenario will affect the economy, the capital market, and your portfolio.
• It may be helpful to stick to a long-term strategy, which is longer than any election cycle, as returns in the capital market are made over a full business cycle, which may be longer than even one presidential term. For investors with a low-risk tolerance, the safety of bonds can douse their apprehensions”.
• Adonri said when interest rate rise, investors tend to migrate to fixed-income securities.
• “The hike is capable of migrating financial assets away from equities to fixed income; expect investors to sell down their shares in the near term. Both equities and fixed income operate on yield, with the increase in the interest rate the yield in fixed income will be higher and investors will move there until the price of equities fail to be competitive with the debt market. If microeconomic improves and inflation starts dropping it will then favour the equity market and we will start seeing stabilization”.