Profit-taking weighs stocks as earnings season peaks

Stock investors may route to re-assess their portfolio at the equities market, majorly in favour of companies (particularly in the financial sector) whose full year 2015 results outperformed.

After a bullish outing last week, stock trading kicked-off this week on a lower note indicating investors’ cautious guidance on equities and Full Year 2015 earnings flow.

Amid rising earnings release by early bird banks like GTBank plc, United Bank for Africa plc and Zenith Bank plc as well as profit warnings from FBN Holdings plc, ETI plc and Diamond Bank plc, many market analysts sentiments now slope in favour of a mix of bargain and profit-taking.

Last week, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) appreciated by 0.65percent to close last week at 25,988.40 points against 25,820.10points the preceding week. Also, the market capitalisation of listed equities rose by N58billion to N8.940 trillion against N8.882 trillion recorded the preceding trading week.

All other Indices finished higher last week, with the exception of the NSE Premium Index and the NSE Industrial Goods Index that declined by 1.65percent and 0.15percent respectively.

Thirty-nine (39) equities appreciated in price last week, higher than thirty-five (35) equities in the preceding week. Twenty-two (22) equities depreciated in price, lower than twenty-four (24) equities in the preceding trading week, while one hundred and twenty eight (128) equities remained unchanged, lower than one hundred and thirty (130) equities recorded in the preceding week.

After a favourable outing last week, the stock market this week entered an observed correction mood as investors increased supply for equities with bleak earnings outlook. 

“We expect a mixed week as corporate earnings releases balance tendency for profit-taking following recent gains”, said research analysts at Vetiva Capital Management Limited.

United Capital analyst had expected a slow start to this week as investors re-assess portfolio positions in line with their expectations of FY-15 earnings numbers and dividends proposals which could cause some profit-taking.

Market analysts at Meristem Securities anticipate that market activities this week will be driven by earnings releases and dividend declarations, especially given that some banks released results. “Given this and provided that releases are generally positive, we would expect that market may finish in the green zone,” the analysts further said.

“We anticipate strong sell-offs in counters such as Diamond bank following the release of a profit warning with respect to its FY-15 results. That said, we think positive sentiments will gradually trickle-in and anticipate equities will close the week marginally higher”, the analysts added.

 Iheanyi Nwachukwu