Cautious trading as mixed feelings trail equities market

Investors may this week choose the route of ‘caution’ following the mixed feeling from investment and research analysts about the stock market.

Coming from a value loss of N65 billion last week, many analysts expect to see a continuation of this trend, while some are of the view that expectations of good half-year (H1) results and most likely interim dividend may spur buy decisions in favour of equities market.

As investors ponder over their portfolio mix (equities and bonds) this week, their investible funds flow into equities, particularly from foreign and institutional investors, will trigger an upbeat in the market.

Analysts at FSDH Merchant Bank say they expect some levels of profit-taking in the equities market in this month of July, as the market remains bullish.

“This week, we anticipate interplay of the bulls and the bears amid release of more positive corporate financials,” say market analysts at Cowry Asset Management Limited.

“Investors should watch out for the stocks that may likely pay interim dividend. Such stocks include GTBank, Access Bank and Seplat. We still maintain our long position in select banking, Insurance and FMCG stocks. Going by historical trend, there is evidence to show that the market may appreciate in the month of July,” the analysts state.

According to them, “the expectations of good half-year results and interim dividend may drive the equities market in July. The renewed confidence in the market and the attractiveness of some select equities in the Oil and Gas, FMCG and banking sectors may continue to drive the market to appreciate further in the month of July.”

Last week, the NSE All Share Index (ASI) dropped by 198.99 points or 0.46 percent amid analysts expectation of an improved performance. The equities market, which opened last week with market capitalisation of N14.208 trillion, declined to N 14.143 trillion after trading last Friday. The NSE ASI, which opened at 43,031.81 points at the beginning of trading last week, declined to 42,832.82 points.

Also, Meristem Securities analysts say: “Our expectation for the coming week is positive, as we expect investors to continue to strategically take position ahead of Q2:2014 numbers, as some of the companies in the sector with good dividend payout history (Guinness and International Breweries) are expected to release the full-year results soon.”

Investment analysts at UBA Capital plc say they expect Q2 results to ignite market activity and swing the market mood positively.

Accordingly, these analysts note that they do not see major earnings’ release this week (based on historical trends); “we therefore expect some level of cautious trading by investors this week. We are also of the opinion that the fixed income market will trade relatively flat this week as investors await stop-rates of upcoming auction to guide trading.”

UBA Capital analysts further say: “While we expect Q2 results to trigger market activity, we do not see major earnings’ release this week based on past release dates. Applying release dates of Q2:2013 result of companies as a guide; we do not anticipate significant deviation from these dates by companies; we therefore expect some level of caution in this week’s trading.”

The NSE 30 Index, which tracks the performance of large cap stocks, rose slightly to 1,945.69 points from 1,945.15 points at the beginning of trade last week.

Performance indicators last week further showed that NSE Banking Index declined to 437.35 points from a relatively high level of 438.08 points; also, the NSE Insurance Index dropped from 149.01 points to 148.19 points.

The NSE Consumer Goods Index, which opened last week at 1,046.03 points, appreciated to 1,053.69 points, while NSE Oil/Gas Index, which stood at 454.93 points at the beginning of last week, rose to 477.63 points as of last Friday.

NSE Lotus Islamic Index opened last week at 2,857.30 points, but dropped to 2,836.03 points; NSE Industrial Index dropped from a week open level of 2,724.03 points to 2,705.31 points at the close of deals last week, while NSE ASeM Index moved up from 945.65 points to 948.56 points recorded last Friday.

In their view, analysts at Access Bank plc say “performance indicators may likely remain subdued this week due to possible losses by market movers. More profit-taking is also likely to cause a passive mood at the Exchange.”

Recently, market analysts at Financial Derivatives Company Limited note their belief that the stock market rally will slow this month “as market manipulation becomes obvious.” They however expect increased regulatory scrutiny “as cases of pumping and dumping stocks manifest.”

Iheanyi Nwachukwu