Capital market analysts have anticipated market recovery this week, amid investors looking forward to the first half (H1), 2023 earnings season.
After seven consecutive weeks of bullish run, the Nigerian Exchange (NGX) benchmark index reversed its gains to bearish region last week as profit taking activities resurfaced with sell-offs that hit all kinds of equities across low, medium and high-priced stocks across all market sectors.
This comes despite the gradual return of portfolio investors into the equities market and declining rates from money market as seen from the last treasury bills auction.
Also, despite panic selling by fearful investors or traders, discerning investors are taking advantage of the pullbacks or price correction to position ahead of the June consumer price index report, corporate earnings expectation and announcement of ministerial list by the new government.
Similarly, all eyes are on the outcome of this month’s meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee, even as inflationary pressure has increased significantly with the ongoing economic reforms and unification the exchange rate.
Analysts Optimism
The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said: “anywhere in the world, stock markets have cycles of bull and bear, the bear market results from profit taking or pullbacks, following which investors should know that profit taking and positioning are part of market dynamics.
“We look forward to a mixed outing and intermittent profit taking. It is noteworthy that factors responsible for pushing the market to this level remain unchanged so far, even as we expect that the earnings reporting season will reveal the state of corporate earnings and others.”
This week, analysts at Cowry Assets Management Limited said “we expect the bearish sentiment to continue as market heads for a correction in the short term, creating an attractive entry point for discerning equity investors seeking alpha to continue targeting the fundamentally sound defensive stocks to protect their portfolios as we enter the new reporting and earning seasons.
“Also, the profit taking activities are expected to persist in the absence of major catalyst to trigger positive sentiments. Meanwhile, we continue to advise investors on taking positions in stocks with sound fundamentals.”
Cordros Securities Limited added that, “with the half-year earnings season on the horizon, we believe investors will look for clues on the sustainability of the decent corporate earnings released for Q1 2023. However, we expect mixed market performance in the week ahead as bargain hunting on dividend-paying stocks will be matched by intermittent profit-taking activities.
“Overall, we reiterate the need for taking positions in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.”
Last Week’s Trading Activities
Although the domestic bourse started last week on a solid footing on positive reactions to Dangote Cement’s share buy-back announcement, the bullish momentum lost steam as investors took a breather following the recent rallies.
As a result, the All-Share Index declined by 0.75 per cent week-on-week (W-o-W) to close at 62,569.73 points. Similarly, market capitalisation lost N256 billion W-o-W to close at N34.070 trillion.
The performance across sectors has predominantly been mixed, with the NGX Industrial and NGX Oil & Gas index emerging as the top gainers of the week by 9.01 per cent and 1.43 per cent week-on-week. On the other hand, the NGX Banking index exhibited a lackluster weekly performance with a decline of 14.32 per cent. Also, the NGX Insurance index followed closely with 11.53 per cent decrease and the NGX Consumer Goods index closed by 2.29 per cent loss week-on-week due to negative price movements.
The market breadth for the week was negative as 29 equities appreciated in price, 77 equities depreciated in price, while 50 equities remained unchanged. Daar Communications led the gainers table by 50.00 per cent to close at 30 kobo, per share.
John Holt followed with a gain of 44.80 per cent to close at N1.81, while Deap Capital Management & Trust went up by 34.62 per cent to close to 35 kobo, per share.
On the other side, Champion Breweries led the decliners table by 31.52 per cent to close at N3.15, per share. Academy Press followed with a loss of 26.80 per cent to close at N1.83, while Wema Bank declined by 25.55 per cent to close at N4.05, per share.
Overall, a total turnover of 5.246 billion shares worth N63.417 billion in 57,234 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 9.831 billion shares valued at N145.408 billion that exchanged hands previous week in 54,478 deals.
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