Unexciting Q3 scorecards seen keeping bears in sight

Stocks look set to be dragged-down by the current wave of unappealing companies’ third-quarter (Q3) results that are berthing at the Nigerian bourse. The stock market had played host to choppy deals which were mostly in favour of the buy-side as most companies’ impressive Q3 results helped to attract inflows into equities.

Despite this development, most analysts see recently released unattractive scorecards causing a distortion that could wreak havoc on Nigerian equities market while the bears set in.

The domestic equity market commenced this week on a negative note as the benchmark index closed lower amid lack of incentives for Nigerian equities – as some of the 9months earnings being released failed to appease stock buyers.

Before now, at the Nigerian Stock Exchange (NSE) last week stock trading started on a promising note with renewed optimism and bargain hunting by stock dealers, but by mid-week profit-taking set-in and the consequent headwind hindered the performance of the broad market index.

The NSE All-Share Index and Market Capitalisation appreciated by 0.60percent to close last Friday at 30,011.89 points and N10.314 trillion respectively.

Similarly, all other Indices finished higher during the week in review with exception of NSE Insurance, NSE Consumer Goods and NSE Lotus Islamic indices that declined by 0.81percent, 0.49percent and 0.42percent respectively, while NSE ASeM Index closed flat.

Twenty-six (26) equities appreciated in price during the review week, lower than twenty-nine (29) equities in the preceding trading week. On the contrary, thirty-seven (37) equities depreciated in price, lower than thirty-nine (39) equities in the preceding week, while one hundred and twenty-seven (127) equities remained unchanged, higher than one hundred and twenty-two (122) equities recorded in the preceding week.

“If the current momentum is sustained, the Nigerian Bourse may remain in the green zone this week,” said research analysts at Lagos-based investment bank, Dunn Loren Merrifield.

“As earnings season gear up, reported numbers and expectations will be the major driver behind market performance. Overall, we do not expect exciting numbers but we look to see decent performance from the banks,” according to research analysts at United Capital plc.

The analysts further said, “Reactions to select weak earnings reported last week will possibly be sustained at the start of the week, while scorecards from non-financials are likely to be tepid, keeping the bears in sight for a better part of the week. Thus, we expect the market to trade sideways this week, tilting towards the negative.” Sentiment at the local bourse increased recently due to Q3 earnings season – though the third-quarter numbers remained mixed.

“The equity market remains attractive for speculative and long term investors. We expect market to react to the release of Q3 2015 results,” research analysts at Lagos-based FSDH Merchant Bank had said ahead of the Q3 earning season.

Iheanyi Nwachukwu