Nigerian equities still at the mercy of investor apprehension

Investors fear of losing more money in stocks and their unending wait for ‘good news’ from both listed corporates and federal government have continued to limit Nigerian stocks performance.

As at early this week, Nigerian equities return declined in excess of 16percent in Year-to-Date (ytd) performance, causing investors to further exercise prudence in their equities bet.

Unimpressive third quarter (Q3) earnings, increasing regulatory sanctions and associated penalties, volatile forex market, investors wait for inauguration of presidential cabinet, among other factors have  contributed to sell offs witnessed in most stocks.

However, research analysts differ in their expectations from equities market as shown in most weekly views and outlook. While some are positive over market rebound, others foresee further sell pressure pushing stocks value down.   

“We expect last week’s showing of the bulls to persist this week despite overall cautious sentiment in the equities space. The market is currently at the oversold region (RSI at 30),” according to market analysts at Lagos-based United Capital plc.

The analysts said: “while it is a knotty task to ascertain when the market will fully bottom out before a trend reversal, we posit that at current levels, the market remains attractive for medium to long term positioning, particularly in value and dividend-paying stocks. The inauguration of the presidential cabinet this week further lends credence to our expectation of a positive close.”

While reviewing the market, these analysts noted that “following third quarter earnings from counters that were not noteworthy, coupled with negative events trailing the domestic market, bearish sentiment in the market lingered in last week’s trading, though at a much softer pace with the local bourse recording marginal losses in four out of five trading days”.

The NSE All-Share Index depreciated by 0.01percent to close last Friday at 29,175.35 points from 29,177.72 points at the beginning of trade last week. Also, the market capitalisation dipped by 0.02percent, from N10.029 trillion to N10.028 trillion. A turnover of 1.949 billion shares worth N17.336 billion in 15,762 deals were traded last week by investors on the floor of The Exchange in contrast to a total of 1.358 billion shares valued at N14.722 billion that exchanged hands the preceding week in 14,772 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.714 billion shares valued at N10.770 billion traded in 9,378 deals; thus contributing 87.93percent and 62.13percent to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with a turnover of 73.433 million shares worth N173.733 million in 908 deals; while the Oil and Gas Industry followed with 62.711 million shares worth N2.702 billion in 1,688 deals.

“The equity market may remain in the red zone this week if investors’ apprehension continues. Last week, Nigerian equities weren’t spared from investors’ apprehension as it recorded significant selloff in bellwether stocks which exerted further pressure on the market,” said research analysts at Lagos-based investment bank, Dunn Loren Merrifield in their recent financial markets highlights.

Last week, trading in the Top Three Equities namely – Access Bank Plc, Zenith International Bank Plc and United Bank for Africa Plc (measured by volume) accounted for 1.276 billion shares worth N8.340 billion in 2,782 deals, contributing 65.45 percent and 48.11percent to the total equity turnover volume and value respectively.

Also traded during the week in review were a total of 7,291 units of Exchange Traded Products (ETPs) valued at N437,490.20 executed in 35 deals compared with a total of 330,708 units valued at N1.616 million transacted last week in  53  deals.

Similarly, all other Indices finished lower during the week with exception of NSE Premium, NSE 30, NSE Insurance, NSE Oil/Gas, and NSE Pension indices, while NSE ASeM Index closed flat.

Twenty-four (24) equities appreciated in price last week, higher than twelve (12) equities in the preceding week. Forty-three (43) equities depreciated in price, lower than fifty-one (51) equities in the preceding week, while one hundred and twenty-three (123) equities remained unchanged, lower than one hundred and twenty-seven (127) equities recorded in the preceding week.

Foreign portfolio investors reduced their stake in Nigerian equities market as shown in the latest trading figures from major custodians and market operators on their foreign portfolio investments (FPI) as polled by the Nigerian Stock Exchange (NSE).

Details show that as at the end of September 2015, foreign portfolio investments transactions at the nation’s bourse decreased to N69.33 billion (about $0.35 billion) from N81.13 billion (about $0.41 billion) at the end of August 2015; representing a decrease of 14.54%.

“We have not seen a marked spillover from fixed income to the local equity market. The comparable benchmark index is the less challenging MSCI. Also, a high proportion of offshore players invested in the NSE are Africa dedicated funds (with or without South Africa)”, said Gregory Kronsten led team of research analysts at FBNQuest.

In the nine months to September 2015, out of the total transactions worth N1.560trillion, total foreign inflow was just N396.36billion while total foreign outflow was N450.56billion.

Month-on-month, out of total transactions of N129.92billion in September, total foreign inflow was just N29.26billion while total foreign outflow was N40.07billion.

While Cowry Asset Management analysts said they expect to see a resurgence of bargain hunting on expected improvement in system liquidity, market analysts at Access Bank plc said, “We envisage that the market will remain bearish as the selling pressure may likely persist.”

 Iheanyi Nwachukwu