Massive buying triggers circuit breaker on stock exchange

By Helen Oji

• Investors gain N1 trillion
• Operators explain cause of rally

For the first time since its introduction in 2016, circuit breaker was activated for about 30 minutes on the Nigerian Stock Exchange (NSE) yesterday when the All-Share Index (ASI) rose beyond the set threshold of five per cent.

The circuit breaker protocol was triggered by the increase of the ASI from 33,268.36 to 34,959.39. The market reopened at exactly 1:25 p.m. with a 10-minute session, before resuming continuous trading till the close of the day at 2:30p.m.

At the close of transactions yesterday, investors’ wealth soared by N1 trillion as market capitalisation appreciated to N18,467 trillion from N17,383 trillion recorded on Wednesday, while the ASI increased by 2,074.1 points or 5.8 per cent from 33,266.36 on Wednesday to 35,342.46 yesterday.

Circuit breakers are trading halts used by stock exchanges to guard against sharp fluctuations in the market. On the NSE, circuit breakers will be triggered during periods of extraordinary volatility in the equities market in order to maintain an orderly market, and to allow liquidity to re-aggregate.

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Reacting to the development, a stockbroker with APT Securities Limited, Jamiu Kayode, linked the unprecedented rally to the declining interest rate in the fixed income market.
He said: “This is a result of the interest in the money market which is currently at ridiculous low. So the next destination of investment is capital market.

“Also, the only investment that can yield the required rate of return for investors presently is the equity market. It is mostly the activity of local institutional investors who see equity investments as the next destination of investment that is driving the rally.”

In March 2020, trading on the New York Stock Exchange (NYSE) was halted for 15 minutes when a market drop triggered the exchange’s internal circuit breaker, shortly after 9:30am.

The control, part of the NYSE’s automatic provisions to pause trading, has been put to the test since markets first began realising the extent of the economic damage that a worsening COVID-19 outbreak could cause in the U.S.

The Guardian learnt that the circuit-breaker system used by the NYSE and other large United States trading platforms was implemented after the black Monday stock crash of 1987, when major exchanges fell by 20 per cent in one day.

A breakdown of yesterday’s transactions indicates that the upturn in activities was impacted by gains recorded in large capitalised stocks, amongst which are Nestle Nigeria, Airtel Africa, Dangote Cement, Presco and Nigerian Breweries.

Market breath closed positive, recording 65 gainers and eight losers. C&I Leasing, Cadbury Nigeria, Cutix, Julius Berger, Northern Nigeria Flour Mills (NNFM), Presco, Sterling Bank, BUA Cement and Airtel Africa recorded the highest price gain of 10 per cent each, to close at N4.51, N11.00, N2.09, N19.25, N7.70, N79.75, N2.42, N51.15 and N451.20 per share.

Global Spectrum Energy Services led the losers’ chart by 9.89 per cent, to close at N4.19 per share. Eterna followed with a decline of 9.86 per cent to close at N4.57 per share.