Equities demand rises on Q1 positive surprises

As the first-quarter (Q1) results season continues to reveal companies’ fairly impressive earnings despite challenging operating environment, analysts foresee the trend impacting positively on the performance of the bourse in the near-term. 

“The optimistic tone sees value buying in blue chips stocks which in our view,  is an evidence of a sentiment-based shift that can feed a much more rallies even as the market appear to be re-pricing risk,” said research analysts at Lagos-based investment house, Dunn Loren Merrifield.

“While investors have macroeconomic issues to contend with, moments such as this can, in our view, demonstrate the important of investment diversification”, the analysts added.

Following a renewed optimism by speculative buyers, the Nigerian equity market opened the month of May on a bullish note, recording the best start to a month since April 2015, as most key sectors advanced significantly.

The bulls rushed to the stock market in the early trading days of this week, and helped the market’s performance indicator –the All Share Index (ASI) –to log biggest intra-day gain since January 20, 2016.

“The Nigerian stock market oscillated between green and red closes through the last week of April following mixed performances across key sectors. Financials recorded a week-long gaining streak as investors cheered a number of better-than-expected Q1’16 earnings from the sector whilst Oil & Gas shares recorded the most declines following four sessions of heavy beating.

“We see further room for mixed trading pattern with slightly bullish bias when the market resumes on the 3rd of May as we expect investors to continue to react to the latest string of Q1’16 earnings” research analysts at Vetiva said in their latest breakfast report.

Attractive valuations found in most stocks triggered bargain hunting activities at the market which gained about N64billion last week.

Amid ongoing delay in passage of the 2016 budget and the potential downside to Corporates earnings, most first-quarter (Q1) top-line numbers are still coming in slightly better than analysts’ estimates.

Though, thirty-three (33) equities appreciated in price in the review week, lower than thirty-five (35) equities in the preceding trading week. Thirty-five (35) equities depreciated in price, higher than thirty-two (32) equities in the preceding week, while one hundred and twenty-one (121) equities remained unchanged, lower than one hundred and twenty-two (122) equities in the preceding week.

“While we expect a quiet start as investors return from a long weekend, we envisage demand for equities will pick-up in the course of the short week, as investors continue to take positions on Q1-16 earnings.

“We note that Q1 has thrown up some positive surprises in terms of earnings performance from counters such as Nestle and Access, and think further surprises may spur demand in the near term.

Iheanyi Nwachukwu