BY OLUSHOLA BELLO |
Financial analysts and experts in the capital market are optimistic that the bears are likely to continue their dominance on the floor of the Nigerian Stock Exchange (NSE) this week.
Summation of experts’ forecast available to LEADERSHIP Sunday indicates that the confidence is anchored on investors leaning towards the fixed income space.
In its weekly Financial Markets Review & Outlook, analysts at Cowry Assets Management Limited said: “In the new week, we expect the domestic equities market to slip further as investors stay on the side lines to target new support levels.”
They however, said a decline in stop rate, especially for 364-day at the primary market auction in the new week may change trading dynamics in equities towards the end of the trading week.
Similarly, analysts at Cordros Capital Limited said: “we expect the choppy theme that played out last week to persist in the week ahead as investors continue to cherry-pick dividend-paying stocks and, at the same time, exhibit reluctance in leaving gains in the market.
“With uncertainties about the direction of yields in the fixed income market still bugging investors’ minds, the bears are likely to retain dominance in the market. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”
Analysts at Afrinvest Limited also noted that, “with investors leaning towards the fixed income space, sentiment is expected to remain bearish in the near term. However, we believe this presents investors with attractive entry opportunities in the equities market.”
Last week, sentiment remained negative in the market as equities sell-offs persisted despite the dividend announcement by companies.
Notably, yields at the fixed income space continue to move upwards as the stop rate for the 364-day treasury bill rose to 6.5 per cent from 5.5 per cent; hence, investor appetite for stocks weakened.
Against this backdrop, the All-Share Index moderated by 2.89 per cent week-on-week to close at 38,648.48 points. Similarly, market capitalisation declined N357 billion W-o-W to close at N20.221 trillion.
Losses were broad-based as all sub-indices tracked closed in red territory except for the NSE Industrial index which rose by 1.34 per cent to 1,923.55 points. The NSE Banking index plunged by 7.58 per cent to 353.75 points.
Also, the NSE Consumer Goods, NSE Insurance, and the NSE Oil/Gas indices tanked by 4.26 per cent, 2.29 per cent and 1.59 per cent to close at 539.85 points, 197.46 points and 261.18 points respectively.
Market breadth for the week was negative as 35 equities appreciated in price, 38 equities depreciated in price, while 71 equities remained unchanged. Champion Breweries led the gainers table by 45.24 per cent to close at N2.44, per share. Regency Assurance followed with a gain of 22.22 per cent to close at 33 kobo, while Smart Products Nigeria went up by 20.00 per cent to close to 24 kobo, per share.
On the other side, Eterna led the decliners table by 18.95 per cent to close at N4.70, per share. Meyer Plc followed with a loss of 18.00 per cent to close at 41 kobo and African Alliance Insurance declined by 16.67 per cent to close at 20 kobo, per share.
Overall, a total turnover of 1.675 billion shares worth N23.541 billion in 21,732 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 2.092 billion shares valued at N29.744 billion that exchanged hands previous week in 24,238 deals.
The financial services industry, measured by volume led the activity chart with 1.200 billion shares valued at N10.272 billion traded in 12,518 deals; contributing 71.64 per cent and 43.64 per cent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 110.564 million shares worth N3.577 billion in 3,234 deals, while Industrial Goods Industry traded a turnover of 99.761 million shares worth N5.322 billion in 1,309 deals.
Trading in the top three equities; United Bank for Africa (UBA), FBN Holdings and Zenith Bank, measured by volume accounted for 524.548 million shares worth N5.957 billion in 5,346 deals, contributing 31.32 per cent and 25.30 per cent to the total equity turnover volume and value respectively.
On Exchange Traded Products (ETPs) platform, a total of 217,600 units valued at N3.699 million were traded last week in six deals compared with a total of 56,069 units valued at N411.581 million transacted previous week in 12 deals, while on the Bonds market, a total of 9,192 units valued at N10.671 million were traded last week in six deals compared with a total of 4,550 units valued at N4.857 million transacted last week in eight deals.
On market outlook, the chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion said: “we expect the mixed trend to continue as more corporate earnings hit the market in the face of rising fixed income market yields, oil prices and high dividend yields during this earnings season.
“Also, the pullbacks offer bargain hunters and income investors another opportunity to reposition, while more companies release their full-year numbers to 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.”
According to Omordion, 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 the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.
“However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected 2020 full earnings reports, until the next MPC meeting in March. The NSE’s index action and indicators are in divergence on a low traded volume and positive buying sentiments,” he pointed out.