Equities search for new triggers as earning season wanes

Even as the euphoria of full year earnings season failed to lift Nigerian equities from the negative territory in first-quarter (Q1), the market looks set to witness historic sell-off as the season wanes.

Many speculative investors had in Q1 rushed to the local bourse and increased their position in dividend paying stocks ahead of closure of companies registers.

With the earnings season now fading, the sell-side looks good to rise even as there are no new triggers that could drive investors buy decisions.

Coming from equities value loss of about N136billion last week, this week’s choppy buying looks good not to narrow the wide loss margins already recorded at the Nigerian bourse. The equities market is even worse off following a renewed decline in crude oil price –a major driver of Nigeria’s spending power.

The stocks market of Africa’s biggest economy resumed this week on a negative foot –signifying that investors may be repositioning for move towards recent lower oil prices, fading earnings season and their impact on prices of Custom Street listed stocks.

Despite last Tuesday’s gains, analysts insist cautious trading was evident as equity prices generally displayed moderately mixed tendencies.

“While risk-averse disposition remains the dominant sentiment, the current price action reflects a market that is capitulating; this in our view suggests that the market may be on the cliff of an historic sell-off”, said research analysts at Dunn Loren Merrifield.

Market analysts at Vetiva Capital Management who noted weak investor appetite as indicated by the sustained low volumes in recent trading sessions, said they expect gains to thin out in other trading session.

“Profit taking on previous gains is expected to continue this week, as the full year 2015 earnings season draws to a close, though we may see moderate bargain hunting as speculators exit positions post closure of registers. This should leave the market in search of new triggers, which will likely shift attention to the strength of domestic macro fundamentals”, according analysts at Lagos-based United Capital plc.

The value of listed equities on the Nigerian bourse declined to N8.773trillion last week from a preceding week’s highs of N8.909 trillion. The Nigerian Stock Exchange (NSE) All-Share Index (ASI) which tracks the performance of the local bourse also declined last week by 1.52percent to close at 25,507.09 points from 25,899.91 points recorded in the preceding trading week. The Year-to-Date (YtD) returns stood at -10.95percent last week.

Iheanyi Nwachukwu