H1 Earnings Season To Dictate Stock Market Performance This Week

As listed companies begin to release their half year financial results on the Nigerian Exchange Limited, analysts expect positive earnings and interim dividend declarations to spur increased bargain-hunting activities on the bourse.

The expected release of more half year earnings reports will prompt investors to position in defensive stocks to protect their portfolios. This comes as investors digest the outcome of the recently held Monetary Policy Committee (MPC) meeting and the impressive half-year scorecards by corporates.

Analysts Optimism

This week, analysts at Cowry Assets Management Limited expected “the bearish sentiment to continue as the market undergoes the short-term correction in the face of corporate releases while equity investors continue their portfolio positioning in defensive stocks and the hope tide of impressive half-year reports. Meanwhile, we continue to advise investors on taking positions in stocks with sound fundamentals.”

Also, Cordros Securities Limited said: “we expect a flurry of earnings releases on NGX’s floor as more companies publish their half-year numbers. Against the preceding, we think positive earnings surprises and possible interim dividend declarations from companies would spur increased bargain-hunting activities on the bourse.

“Nevertheless, we do not rule out the possibility of profit-taking activities on tickers that have experienced substantial appreciation. In the medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income market.”

The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said: “we expect mixed sentiments to continue as market players digest the corporate earnings, changing economic fundamentals and concerns, with the ministerial list released, expectation of more earnings inflow.

“There are also factors such as bargain hunting and policy meeting outcomes in the midst of profit taking, economic concerns and portfolio repositioning amidst supportive reforms of the government. There is also the hope for more policy pronouncements and appointments that would offer investment direction.”

Last Week’s Trading Activities

The domestic bourse closed in the green territory despite pressure from profit-taking activities during the week.

Eventually, the NGX All-Share Index (ASI) rose by 53.00 points or 0.02 per cent week-on-week (W-o-W) to close at 65,056.39 points. Similarly, market capitalisation appreciated by N868 billion to close at N35.403 trillion.

Precisely, bargain hunting in Seplat Energy and Stanbic IBTC Holdings amid sell-offs of Nigerian Breweries and FBN Holdings stocks drove the weekly gain.

Sectoral performance was broadly negative as NGX Consumer Goods led weekly losers of 2.4 per cent. NGX Banking index recorded a weekly loss of 2.2 per cent, while NGX Insurance index declined by 1.6 per cent and NGX Industrial Goods index declined by 0.3 per cent. On the flip side, the NGX Oil and Gas index rose by 1.4 per cent for the week.

The market breadth for the week was negative as 39 equities appreciated in price, 54 equities depreciated in price, while 62 equities remained unchanged. Skyway Aviation Handling Company led the gainers table by 43.83 per cent to close at N23.30, per share. Lasaco Assurance followed with a gain of 26.88 per cent to close at N32.03, while NASCON Allied Industries went up by 24.14 per cent to close to N36.00, per share.

On the other side, Cadbury Nigeria led the decliners table by 26.76 per cent to close at N12.45, per share. John Holt followed with a loss of 23.08 per cent to close at N2.20, while Multiverse Mining and Exploration declined by 19.68 per cent to close at N2.98, per share.

Overall, a total turnover of 2.854 billion shares worth N37.645 billion in 41,547 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 4.182 billion shares valued at N99.048 billion that exchanged hands prior week in 41,446 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.936 billion shares valued at N27.704 billion traded in 20,839 deals; contributing 67.84 per cent and 73.59 per cent to the total equity turnover volume and value respectively. The Oil and Gas Industry followed with 328.578 million shares worth N2.073 billion in 3,252 deals, while the Conglomerates Industry pulled a turnover of 156.660 million shares worth N692.091 million in 2,139 deals.

Trading in the top three equities; FBN Holding (FBNH), Japaul Gold & Ventures and United Bank for Africa (UBA) accounted for 988.076 million shares worth N13.278 billion in 5,887 deals, contributing 34.62 per cent and 35.27 per cent to the total equity turnover volume and value respectively.