Many penny stocks posted price depreciation on the Nigerian Stock Exchange (NSE) for the month of February, with Consolidated Hallmark emerging the worst performing stock in percentage terms.
The News Agency of Nigeria (NAN) reports that the stock, which opened trading for the month at 50k, lost 48 per cent to close at 26k per share, due to exchange new pricing method.
Data obtained from the NSE indicated that Unic Diversified Holdings, another penny stock, came second, dropping by 47.83 per cent to close at 24k per share against opening price of 46k.
Courtville Business Solutions dipped 46 per cent to close at 27k against 50k, while Mutiverse lost 37.5 per cent to close the month at 30k per share compared with the opening price of 48k.
NAN reports that new pricing method commenced on Jan. 29.
Dr Uche Uwaleke, Head of Banking and Finance Department, Nasarawa State University Keffi, told NAN in Lagos that the new pricing methodology led to losses posted by most penny stocks.
“It is the new pricing methodology that has injected liquidity into those penny stocks which allowed their prices to fall below 50k,” Uwaleke said.
He said that the development also indicated an increase in domestic investor participation in the stock market.
“Unlike foreign investors who show more interest in high-cap stocks, a good number of domestic investors take positions in penny stocks given their affordability,” he said.
Uwaleke said that the new method was aimed at improving liquidity, narrowing spreads and ensuring that all price-improving transactions had impact.
He said that the new rule would effectively remove the previous rule which placed minimum allowable price for any stock to trade at its nominal value, irrespective of the market forces.
According to him, it specifies that stock prices will be determined by market forces of demand and supply, as prices can fall below the initial price.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd. also atrributed the development to the new pricing rule.
Omordion added that the losses posted by some second tier banking stocks were due to profit-taking following rally posted at the beginning of the year.
Other top losers include Skye Bank which dipped by 34.01 per cent to close at 97k against N1.47 in January, while Wema Bank lost 32.65 per cent, having closed at 99k in contrast with N1.47.
Diamond Bank dropped 26.10 per cent to close at N2.35 against N3.18, while Unitykap lost 26 per cent to close at 37k against the opening price of 50k.
Lasaco Insurance declined by 21.43 per cent to close at 33k against 43k in January, while Royal Exchange lost 21.43 per cent to close at 33k per share against 42k opening price.
Conversely, Linkage Assurance was the best performing stock in percentage terms, appreciating by 24.64 per cent to close at 86k per share against the opening price of 69k.
Unity Bank trailed with a growth of 17.11 per cent to close at N1. 78 in contrast with N1.52 in January, while NEM Insurance rose by 16.02 per cent to close at N2.10 per share against N1.81.
Other top gainers were Betaglass, 15.64 per cent; Unilever,15.06 per cent; CCNN, 11.27 per cent; Transnation Express, 11.11 per cent; Prestige Assurance,10.87 per cent; GSK, 10.53 per cent; and AIICO Insurance 10.29 per cent.
NAN reports that the NSE All-Share Index during the period lost 1,013.11 points or 2.28 per cent to close at 43,330.54 against 44,343.65 achieved in January.
Also, the market capitalisation which opened at N15.895 trillion shed N146 billion or 2.18 per cent to close the month at N15.549 trillion.
The volume of shares traded dipped by 44.96 per cent as investors bought and sold 11.95 billion shares worth N106. 08 billion achieved in 112,255 deals.
This was in contrast with January turnover of 21. 71 billion shares valued at N197.22 billion traded in 168.649 deals.