Analysts still anticipate cautious deals at NSE

The scenario at Nigerian equities market which resulted to mixture of bargains and profit-taking activities last week may not change suddenly this week as there are still not much positive news flows that could spur some buy activities at the local bourse.

Investors’ cautious position on Nigerian equities results from oil price decline and a corresponding consequence on Nigeria’s foreign reserve and FX market.

Crude oil futures fell for a seventh straight session on Monday, their longest losing streak since mid-2014, as a forecast from the International Energy Agency (IEA) that the global supply glut was likely to deepen next year dragged on prices.

Nigeria’s consumer inflation was at 9.4 percent year-on-year (yoy) in November, up 0.1 percentage point from October, and staying above the upper limit of CBN target, the National Bureau of Statistics (NBS) said early this week.    

Analysts’ views

“The Nigerian Bourse is expected to be largely bearish this week though with occasional spikes which will easily fade off due to lack of catalyst to drive the market”, said analysts at Lagos-based investment house, Dunn Loren Merrifield.

The renewed bargain hunting that occurred at mid-last week was unable to sustain the market as the twin indicators closed last week lower due to strong selling pressure, analysts at Dunn Loren Merrifield noted.

In their view, United Capital analysts said the more bearish outlook for oil price following OPEC meeting last week may have compounded the apathy towards equities.

“Despite fundamental and technical justification of an oversold market and attractive valuation which suggests a reversal, sentiments remain largely weak”, the analysts added.

“Furthermore, expectation of a US Fed rate hike may weaken sentiments marginally. Thus, we think sentiments will be majorly weak in the sessions ahead, though mild pockets of gains will likely be seen”, United Capital analysts added.

In their view, market analysts at Meristem said, “While we do not anticipate a resurgence in the market over the short-term, we opine that the significant pressure which resulted in many stocks paring last week might spur some buy activities over the next few trading sessions.”

“However, we do not expect this to persist, and would expect some profit-taking thereafter, and so we advise investors to trade cautiously,” Meristem analysts added.

Bismarck Rewane led team of analysts at Financial Derivatives Company in their presentation titled ‘2016 a Year of Growth and Commodity Turmoil’ at Lagos Business School breakfast session said: “Current stock price of most companies provides attractive entry points – could alter the market secular bear trend. Recent CBN policy signal is bullish ‘credit expansion’, lower yields on government securities will see a reshuffle in asset classes which might favour equity. The analysts also noted that dynamics driving stocks today can be tomorrow market’s double-edged swords.

Market in review

The value of listed Nigerian equities declined by about N124billion in the trading week to Friday December 11, 2015 as sell pressure further weighed on stocks. Week-on-week (WoW), the Nigerian Stock Exchange (NSE) All Share Index (ASI) lost 1.31%.

The NSE ASI which had opened last week at 27,631.05 points closed at 27,269.71points, and pushed the year-to-date (ytd) returns further negative at -21.32%.  Also, the equities market capitalisation declined from a high of N9.5trillion to N9.376 trillion.

Twenty-five (25) equities appreciated in price last week, lower than twenty-eight (28) equities in the preceding trading week. Thirty-seven (37) equities depreciated in price, lower than fifty-one (51) equities in the preceding week, while one hundred and twenty-eight (128) equities remained unchanged, higher than one hundred and eleven (111) equities recorded in the preceding trading week.

 Iheanyi Nwachukwu