Release of more companies’ earnings for the first half (H1) of 2021, is expected to influence the direction of trading in stocks this week as investors continue to trade cautiously.
Analysts at Cowry Asset Managements Limited said: “in the new week, we expect the equities market to trade positive as investors position in stocks of companies that are likely to give interim dividends and as lower yields in the fixed income market serve as a catalyst to investors looking for higher Return on Investment (ROI).”
Also, analysts at Cordros Securities Limited said: “we expect the bulls to regain dominance in the market given the moderation in the prices of bellwether stocks this week amid the declining yields in the fixed income market.
“However, we do not rule out the possibility of continued profit-taking activities. As a result, we think the choppy trading pattern that played out this week will persist in the week ahead.
“Overall, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.”
Afrinvest Limited noted that, “in the coming week, we expect market performance to be driven by a mix of profit-taking and bargain hunting activities.”
On market outlook for this week, the chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion, said: “We expect a pullback on the markdown of MTN Nigeria for its N4.55 dividend, besides profit-booking and repositioning in value and growth stocks on the strength of half-year earnings reports, while investors continue their portfolio reshuffling and studying of the corporate earnings ahead of first-tier banks results and Q2 GDP data release, as well as results from interim dividend-paying banks.”
He added that investors are still observing the interplay of market forces following recent developments in the FX market as the Central Bank of Nigeria (CBN) plans to launch a digital currency platform. “The day’s low volume suggests that institutional investors and others are still cautiously looking at the numbers. It is noteworthy that oil price continues to oscillate in the international market; as well as corporate actions, and interim dividend possibilities, are around the corner.
“We note also that some stocks are trading within their buy ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $68 per barrel to support the global economy and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support global and domestic economic recovery expected to enhance the market and give direction,” he pointed out.
He further said, the banking sector and others remain attractive on the back of the prevailing low prices, despite the mixed half-year earnings, advising investors to target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021 and beyond, looking the way of mispriced equities ahead of interim dividend announcement and last quarter economic activities.
“This is especially given that despite the seeming improvements, fixed income yield continues to offer a negative real rate of return due to the galloping inflation. However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected Q2 earnings reports,” he said.
Meanwhile, last week, the Nigerian equities market was negative as investors booked profit on stocks given their recent price increases. Consequently, the NGX All-Share Index fell by 39.26 points or 0.10 per cent week-on-week (W-o-W) to close at 39,483.08 points. Similarly, the market capitalisation decreased by N21 billion W-o-W to close at N20.571 trillion.
Performance across the sector was bearish. The Consumer Goods index led losers, down 6.3 per cent W-o-W following price depreciation in Nestle Nigeria, Cadbury Nigeria and Flour Mills of Nigeria. Following closely were the Oil & Gas and Insurance indices, which fell by 1.2 per cent and 1.0 per cent W-o-W respectively on account of price decline in Total Nigeria,
Oando, Linkage Assurance and Mutual Benefits Assurance, while Banking index dipped by 0.8 per cent on the back of sell pressure on Access Bank and United Bank of Africa (UBA). On the flip side, the Industrial Goods index rose 1.9 per cent W-o-W due to buying interest in Dangote Cement and Lafarge Africa.
However, market breadth for the week was positive as 36 equities appreciated in price, 33 equities depreciated in price, while 87 equities remained unchanged. Honeywell Flour Mills led the gainers table by 46.34 per cent to close at N3.00, per share. Pharm-Deko Plc followed with a gain of 44.54 per cent to close at N1.72, while Courteville Business Solutions went up by 29.17 per cent to close to 31 kobo, per share.
On the other side, Meyer Plc led the decliners table by 66.10 per cent to close at 20 kobo, per share. SCOA Nigeria followed with a loss of 18.46 per cent to close at N1.59 and Consolidated Hallmark Insurance declined by 13.21 per cent to close at 46 kobo, per share.
Overall, a total of 866.544 million shares worth N12.257 billion in 17,291 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 1.610 billion shares valued at N12.586 billion that exchanged hands previous week in 18,622 deals.
The Financial Services Industry, measured by volume led the activity chart with 445.324 million shares valued at N3.676 billion traded in 7,560 deals; contributing 51.39 per cent and 29.99 per cent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 119.649 million shares worth N4.969 billion in 3,424 deals, while ICT traded a turnover of 87.132 million shares worth N1.938 billion in 924 deals.
Trading in the top three equities; Honeywell Flour Mill, Transnational Corporation of Nigeria (Transcorp) and Guaranty Trust Holding Company (GTCO), measured by volume accounted for 203.753 million shares worth N 1.964 billion in 2,515 deals, contributing 23.51 per cent and 16.02 per cent to the total equity turnover volume and value respectively.
On Exchange Traded Products (ETPs) platform, a total of 1.001 million units valued at N16.762 million were traded last week in 14 deals compared with a total of 28,938 units valued at N949,074.38 transacted previous week in 13 deals, while on the Bond market, a total of 30,877 units valued at N31.842 million were traded last week in 14 deals compared with a total of 139,062 units valued at N139.702 million transacted previous week in 19 deals.