Bargain hunting imminent as profit-taking fades

Not a few investment analysts at the Nigerian stock market have expressed optimism that the recent decline in equities prices, as driven by profiteering activities of investors, will kick-start bargain hunting era.

As profit-taking weighed on equities for the third consecutive week, trading activities at the Exchange ended in the negative zone. But recent improvement from the buy-side of equities helped the market to kick-off this week on a positive note.

To further buoy the market is investors’ position taking in some companies ahead of their second-quarter (Q2) scorecards. The local bourse took the bearish ride for most part of last week, losing 93 basis points (bps) to end the week with a YtD return in negative of 0.48 percent.

“We are of the opinion that the market should rally in the week to close marginally positive as investors take position ahead of Q2/H1 earnings; we also expect bond prices to trend northwards as improving liquidity buoys demand to pressure yields downward,” say market analysts at UBA Capital.

According to these analysts, “we expect position taking ahead of Q2 scorecards by companies to renew bargain hunting activities and lead to a mild rally in the market this week, especially as recent corrections provide new entry levels for investors.”

Equities market ended on a low for the third consecutive week; the bearish sentiment in the market can be attributed to profit-taking by investors. Market activity also took a downturn as volume and value traded declined week-on-week by about 44 percent and 9 percent, respectively.

“The poor performance from the market may be attributed to investors taking profit from price gains that had built up several weeks earlier. As stop loss limit levels nears, investors exited positions to limit possible losses. Most of the decline in shares prices came from companies in the financial services and consumer goods segments,” note market analysts at Access Bank plc. These analysts say they also expect that the stock market will pick up as investors take position from stocks of excelling companies that market analysts forecasts will have commendable second-quarter (Q2) results.

Meristem Securities analysts say they are of the opinion that the lack of news flow is largely to blame for this lacklustre performance “and so, we assert that the market might begin to swing positive with the influx of Q2:2014 results expected soon.

“Much in line with our expectations, there has been some profit-taking on the banking stocks after the May rally during which most counters appreciated. We expect a good level of activity in the coming weeks, which could push the sector returns upwards due to position taking for expected good Q2:2014 results.” 

Iheanyi Nwachukwu