Mixed sentiments trail equities…

This week’s sentiments in favour of Nigerian equities remain mixed evidenced in the views of many market analysts.

The Nigerian stock market opened the year on a bearish note despite many investment analysts’ position that investors should begin to buy into value stocks as the current state of the market offers them opportunity for re-entry.

Nigerian stock market closed last year with a negative return of 16.14percent, signalling over N1.9 trillion loss in the value of stock held by investors.

Last week at the local bourse, it was another brief trading week as Thursday and Friday were declared public holidays to celebrate the New Year and Eid-el-Maloud, respectively.

The NSE All-Share Index and Market Capitalisation appreciated by 0.66 percent to close on Wednesday at 34,657.15 and N11.478 trillion, respectively.

Thirty-nine (39) equities appreciated in price during the week in review lower than 57 equities of the preceding week. Thirty-six (36) equities depreciated in price higher than 16 equities of the preceding week, while 122 equities remained unchanged lower than 124 recorded in the preceding week.

Meanwhile, a turnover of 1.245 billion shares worth N15.898 billion in 12,018 deals were traded last week by investors on the floor of the Exchange in contrast to a total of 1.860 billion shares valued at N12.760 billion that exchanged hands last week in 13,469 deals.

Amid this outing last week and other macro-economic concerns affecting the market, many investment analysts have mixed feelings concerning the direction of equities this week.

“We expect to see a sustained bearish trend (albeit at a moderated level in the sessions ahead) driven by macro-economic concerns and heightened political uncertainty,” according to market analysts at UBA Capital plc.

They had earlier this week said that they expect the market to continue the current rally witnessed in the last week “as we see investors taking position in value stocks for FY’14 results.”

Their earlier feeling changed after the poor outing at Customs Street last Monday.

“However, we do not rule out some bargain hunting as stock prices will likely bottom out to trigger renewed interest,” they noted.

Market analysts at Associated Discount House Limited said: “With the experience of 16.1 percent loss in 2014, and a relatively bearish outlook for the year, investors will take short positions in equities, particularly foreign investors, seeking lower exposure to the Naira, ahead of elections.”

Considering the outcome of first trading day of this year, these analysts stated: “All bellwether stocks traded lower, leading to 206 basis points (bps) plunge in the broad market index (NSE ASI). Whilst market was relatively active (as reflected in the trading activity – N5.5 billion trade value), market breadth was negative as 29 stocks traded lower (Vs. 16 gainers for the day). Notably, most large-cap stocks closed on Offer, indicating further headroom for price correction tomorrow, as foreign investors sell-down positions, on concern that the CBN may react to protracted Naira volatility via ‘capital control’ measures.”

“Interestingly, the relatively high yield environment reinforces local investors’ appetite for fixed income securities, an asset allocation which may pressure equity prices in the near term,” they further said.

“Partly on the back of anchoring effect, local investors seek safety in fixed income securities, as crude oil price weakens further. Interestingly, foreign investors are bearish on the local currency, thus waning appetite for naira-denominated assets. Beyond the weakening fundamentals of Nigerian corporates, as macro headwinds pressure consumer wallet, concern over probable non-performing loan formation in the banking system further douse investor appetite for stocks.

“Losing 6.3 percent in the first two trading days of the year, we reiterate our conservative outlook on stocks in the first half of the year. In our view, 2015 will be a tale of two halves for equities; bearish start with upside for recovery in the second half of the year, when the headwinds should have abated,” market analysts at Associated Discount House Limited stated recently.

“We anticipate sustained positioning on value stocks in anticipation of year-end benefits declarations,” said investment analysts at Cowry Asset Management Limited, another Lagos-based investment house.

 

Iheanyi Nwachukwu