NIGERIAN STOCK EXCHANGE TO CHANGE PRICING METHOD
From next Monday, January 29, 2018, you may notice equities quoted in the Nigerian stock exchange changing price with wider Naira and Kobo margins which may result, temporarily may be, in remarkable changes up or down in the All share index.
This is because, from this date, the methodology for price fixing at the market has been adjusted and this will take effect.
According to the Exchange's head pf Surveillance Abimbola Babalola in a training session for stock market correspondents and analysts yesterday, the current system which remains relevant till Monday divides equities in the market into two categories: A and B.
The A companies are the ones trading at N100 and above per share while B companies trade below. To move the price of A equity upwards or downwards you must have not less than 10,000 units to sell or buy and such movement can only be in margins of one kobo. As for B companies, you need at least 50,000 units to move price by the same one kobo.
In the new pricing methodology, there are 3 categories: A: for equities priced N100 and above; B: for those priced at between N5 and N99.99 and C: Those priced below N5 per share. Now to move the price of A class shares, you still need minimum of 10,000 units but for B class, you need 50,000 units and for A class: minimum needed is 100,000 units.
More important though is the fact that from Monday the A class equity price can be moved only in 10kobo and its multiples; while B class can only be moved in 5kobo and its mulltiples and C class remains 1kobo and its multiples at a time.
In addition, the old limit on daily price movements per equity remains at 10% either way.
Finally, the exchange is to do away with the more than 10 years rule that says no equity can drop in price below its par or nominal value. Now, all equities are to be allowed to go up and down to any level provided the guidelines as to class and daily limits are not breached.
Then, adds, Babalola, even though there will be constant monitoring of the pricing process daily by the surveillance team to ensure it does not have undesired impact, no equity will be upgraded or downgraded from one class to the other unless it has traded in the new class for 4 out of six months consecutively or otherwise.
As at yesterday, January 23 2018, according to the daily official list, 10 equities traded N100 and above out of the 172 quoted. This includes Skye Shelter Fund trading at N100 which is actually its par value and so, should be affected too by the change of heart on par value bottom.
Those trading above N100 were pace setter Nestle Nigeria at N1471.11 per share as at yesterday; Seplat Petroleum N685; Dangote Cement N269; Total Nigeria N231 and 11 PLC (Mobil) N209 per share.
Others were Nigerian Breweries N145; Guinness Nigeria N120.25; Sim Capital Alliance Value Fund N103.4 and 7Up Bottling N101.97 per share. It had been a long while since any trade was recorded in Sim Capital but the rest are traded mostly on daily basis.
This means that from Monday, price movement in these equities, provided they are above N100 by Monday, will be in 10kobo and its multiples. In other words, they should record wider Naira and kobo margin of price change that could increase their impact on the All share index and other indices they happen to feature in its valuation basket.
Besides, majority of the listed companies fall into category B which now also has minimum price movement of 5kobo compared to 1 kobo across the board for all previously. This too, will affect the All share index relative to today's level.
Lastly, the removed par value bottom will certainly result in downward pricing for most of the 44 equities quoted at par value for years most of them insurance companies, as at January 23. This too should affect the ASI and so, one is likely to see some drastic changes in the market index within the first days of the new pricing system.
Will the ASI, for example, find it easier from Monday to hit all time high 46,000 reached in the heady days of 2008 before the first ever crash of the market occurred? May be, especially as latest report indicate the crude oil prices are still rising thus helping to top up Nigeria'a foreign reserves in spite of political and social challenges within from herdsmen, political posturing for 2019 elections and still steaming cry against Buhari's nepotic ways.
This is because, from this date, the methodology for price fixing at the market has been adjusted and this will take effect.
According to the Exchange's head pf Surveillance Abimbola Babalola in a training session for stock market correspondents and analysts yesterday, the current system which remains relevant till Monday divides equities in the market into two categories: A and B.
The A companies are the ones trading at N100 and above per share while B companies trade below. To move the price of A equity upwards or downwards you must have not less than 10,000 units to sell or buy and such movement can only be in margins of one kobo. As for B companies, you need at least 50,000 units to move price by the same one kobo.
In the new pricing methodology, there are 3 categories: A: for equities priced N100 and above; B: for those priced at between N5 and N99.99 and C: Those priced below N5 per share. Now to move the price of A class shares, you still need minimum of 10,000 units but for B class, you need 50,000 units and for A class: minimum needed is 100,000 units.
More important though is the fact that from Monday the A class equity price can be moved only in 10kobo and its multiples; while B class can only be moved in 5kobo and its mulltiples and C class remains 1kobo and its multiples at a time.
In addition, the old limit on daily price movements per equity remains at 10% either way.
Finally, the exchange is to do away with the more than 10 years rule that says no equity can drop in price below its par or nominal value. Now, all equities are to be allowed to go up and down to any level provided the guidelines as to class and daily limits are not breached.
Then, adds, Babalola, even though there will be constant monitoring of the pricing process daily by the surveillance team to ensure it does not have undesired impact, no equity will be upgraded or downgraded from one class to the other unless it has traded in the new class for 4 out of six months consecutively or otherwise.
As at yesterday, January 23 2018, according to the daily official list, 10 equities traded N100 and above out of the 172 quoted. This includes Skye Shelter Fund trading at N100 which is actually its par value and so, should be affected too by the change of heart on par value bottom.
Those trading above N100 were pace setter Nestle Nigeria at N1471.11 per share as at yesterday; Seplat Petroleum N685; Dangote Cement N269; Total Nigeria N231 and 11 PLC (Mobil) N209 per share.
Others were Nigerian Breweries N145; Guinness Nigeria N120.25; Sim Capital Alliance Value Fund N103.4 and 7Up Bottling N101.97 per share. It had been a long while since any trade was recorded in Sim Capital but the rest are traded mostly on daily basis.
This means that from Monday, price movement in these equities, provided they are above N100 by Monday, will be in 10kobo and its multiples. In other words, they should record wider Naira and kobo margin of price change that could increase their impact on the All share index and other indices they happen to feature in its valuation basket.
Besides, majority of the listed companies fall into category B which now also has minimum price movement of 5kobo compared to 1 kobo across the board for all previously. This too, will affect the All share index relative to today's level.
Lastly, the removed par value bottom will certainly result in downward pricing for most of the 44 equities quoted at par value for years most of them insurance companies, as at January 23. This too should affect the ASI and so, one is likely to see some drastic changes in the market index within the first days of the new pricing system.
Will the ASI, for example, find it easier from Monday to hit all time high 46,000 reached in the heady days of 2008 before the first ever crash of the market occurred? May be, especially as latest report indicate the crude oil prices are still rising thus helping to top up Nigeria'a foreign reserves in spite of political and social challenges within from herdsmen, political posturing for 2019 elections and still steaming cry against Buhari's nepotic ways.
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