BY OLUSHOLA BELLO |
Capital market predicted mixed market performance for this week as the bulls will likely increase their positions in light of decent corporate earnings released last week.
They are of the view that, on the other hand, the bears will look to take advantage of the two-week gains in cashing out given improving yields in the Fixed Income (FI) market.
“Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings,” they said.
The chief operating officer of InvestData Consulting Limited, Ambrose Omordion said: “we expect the mixed trend still, as investors react to positive earnings, in expectation of more Q1 corporate earnings reports, besides profit taking, even in the face of rising virus cases across the globe and high yields in fixed income space.
“We also expect continued portfolio realignments on strength of the earnings performance released so far, and ahead of economic data like the 2021Q1 GDP report, and Purchasing Managers’ Index, among others,” he said.
He also noted that the market has moved out of its trading range, waiting to breakout the next resistance level of 39,412.15bps, while trading above the 14 and 20-Day Moving Average, noting that the market may discount the prospects of high cap companies and some blue-chip stocks, ahead of their earnings reports.
“However, the pullbacks offer bargain hunters and income investors fresh opportunities to reposition in high dividend yields and undervalued stocks, while looking out for quarterly numbers that would support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.
“Again, the way to go is to target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation,” he said.
According to him, however, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by 2020 full numbers and expected 2021 Q1 earnings reports, until the next MPC meeting in May.
“The NSE’s index action and indicators are heading in the same direction on a low traded volume and positive buying sentiments in the midst of rising yield in bond and TB.
“Also, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the new year.”
Analysts at Cowry Asset Management Limited stated that, “in the new week, we expect the domestic equities market to trade sideways as investors further digest the Q1 2021 financial results.”
Afrinvest Limited added that, “this week, we expect market performance to be driven by increased bargain hunting despite subsisting weak sentiment.”
Last week, for the second consecutive week, the domestic equities market maintained its bullish momentum amid relatively positive Q1, 2021 financial results by corporates which spurred buying activity in the market, especially the large capitalised stock such as Dangote Cement, Zenith Bank, Seplat Petroleum Development Company and BUA Cement.
Consequently, the All-Share Index advanced week-on week by 1.36 per cent to close at 39,834.42 points. Similarly, market capitalisation went up by N279 billion W-o-W to close at N20.847 trillion.
Sectorial performance was positive as three out of five indices tracked closed in green; the NSE Insurance, NSE Oil & Gas and the NSE Industrial indices advanced by 3.80 per cent, 1.30 per cent and 2.36 per cent respectively. On the flip side, the NSE Banking and the NSE Consumer Goods indices moderated by 2.09 per cent and 0.02 per cent respectively.
Market breadth for the week was negative as 36 equities appreciated in price, 41 equities depreciated in price, while 85 equities remained unchanged. Royal Exchange led the gainers table by 47.22 per cent to close at 53 kobo, per share. Regency Assurance followed with a gain of 22.22 per cent to close at 33 kobo, while Fidson Healthcare went up by 20 per cent to close at N4.40, per share.
On the other side, Honeywell Flour Mill led the decliners table by 17.14 per cent to close at N1.16, per share. NCR Nigeria followed with a loss of 9.92 per cent to close at N2.27 and CWG declined by 9.84 per cent to close at N2.29, per share.
Overall, a total of 1.441 billion shares worth N10.883 billion in 19,614 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 1.602 billion shares valued at N42.142 billion that exchanged hands previous week in 19,507 deals. The Financial Services Industry, measured by volume led the activity chart with 970.560 million shares valued at N6.779 billion traded in 10,876 deals; contributing 67.36 per cent and 62.30 per cent to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 234.966 million shares worth N387.565 million in 1,320 deals, while Consumer Goods Industry traded a turnover of 61.614 million shares worth N974.254 million in 2,818 deals.
Trading in the top three equities; FBN Holdings, Transnational Corporation of Nigeria (Transcorp) and Access Bank, measured by volume accounted for 603.939 million shares worth N2.963 billion in 3,618 deals, contributing 41.91 per cent and 27.23 per cent to the total equity turnover volume and value respectively.
On Exchange Traded Products (ETPs) platform, a total of 60,447 units valued at N1.069 million were traded last week in 20 deals compared with a total of 262,526 units valued at N4.187 million transacted previous week in 38 deals, while on the Bonds market, a total of 44,354 units valued at N46.342 million were traded last week in 19 deals compared with a total of 70,316 units valued at N78.374 million transacted previous week in 22 deals.