Equities stumble as investors take flight to safety

In what now looks like flight to safety, investors in Nigeria’s capital market may have chosen to increase their allocation to fixed income instruments at the detriment of the stock market.

As half-year (H1) results of many listed companies flock the market, with many falling below market expectations, the Nigerian stock market has seen dominance of the bears whose activities dragged down the overall market performance measures.

Analysts believe that unimpressive H1 results by most listed companies helped spark off investors’ sell decisions.

Albeit the bears reign, there are indications that their contribution on southward trend at the bourse may moderate this week as bargain hunters see opportunities in value stocks that are currently priced low.

Analysts view

“Equities took a beating in a short trading week as the Nigerian bourse shed 0.83 percent last week to peg the year-to-date (YtD) return at 1.46 percent. The downward trend was largely attributable to the negative investor sentiments that greeted the release of H1 results of a few companies,” say research analysts at UBA Capital plc.

These analysts in their investment view for this week note that demand in the fixed income market improved further compared with the preceding week, though with more activity in the primary segment of the market.

“As the earnings season continues, we expect the release of more H1 results to continue to drive equities. However, bargain hunting should cause a mild appreciation in the Index this week,” they say.

“We anticipate a mix of bargain-hunting and profit-taking activities going by investors’ nonchalance towards recent half-year corporate releases,” according to market analysts at Cowry Asset Management Limited.

Though, other schools of thought within the market expect activities at the stock market to pick up. “It is anticipated that moves by investors for high performing blue-chip stocks may improve major indices at the Exchange,” note stock market analysts at Access Bank plc.

Index movement

Indexes movement shows that the NSE 30 Index, which tracks the performance of large cap stocks, recorded a week-to-date (WtD) returns of minus 1.03 percent; month-to-date (MtD), its returns was in negative of 0.42 percent; quarter-to-date (QtD), the returns stood last week at minus 0.95 percent, while year-to-date (YtD) it was 0.33 percent.

For the NSE Banking Index, it was all negative returns across various periods: -3.22 (WtD); -1.36 (MtD); -1.24 (QtD) and -4.54 (YtD). For the NSE Insurance Index the returns were -0.65 (WtD); -0.01 (MtD); 0.64 (QtD), and -3.34 (YtD).

Looking at the performance of the NSE Consumer Goods Index, its periodic returns shows: 0.14 (WtD); -0.21 (MtD); -0.23 (QtD), and -4.04 (YtD).

NSE Oil/Gas Index shows: 3.93 (WtD); 0.36 (MtD); 0.70 (QtD); and 38.73 (YtD). The NSE Lotus II returns show: -0.78 (WtD); -0.27 (MtD); -2.90 (QtD); and -2.51 (YtD). NSE Industrial Goods Index returns indicate: 0.41 (WtD); 0.44 (MtD); 2.20 (QtD), and 7.02 (YtD). The NSE ASeM Index returns shows: 0.00 (WtD); 0.00 (MtD); 0.11 (QtD), and -1.08 (YtD).

Review of transactions

Last week at the Stock Exchange, a turnover of 1.345 billion shares worth N19.580 billion in 17,075 deals were traded by investors in contrast to a total of 1.778 billion shares valued at N38.103 billion that exchanged hands the preceding trading week in 24,186 deals.

Recall that it was a three-day trading week as the Federal Government of Nigeria declared Monday, 28 and Tuesday, 29, July 2014, a public holiday to mark the end of the Holy Month of Ramadan and Eid Ul Fitr celebrations.

As usual, the Financial Services Industry (measured by volume) led the activity chart in the review trading week with 1.019 billion shares valued at N9.004 billion traded in 7,704 deals; thus contributing 75.78 percent and 45.98 percent to the total equity turnover volume and value, respectively.

The Conglomerates Industry followed with a turnover of 105.811 million shares worth 696.406 million in 1,262 deals, while the Oil and Gas Industry followed the Conglomerates Industry with 88.513 million shares worth N2.692 billion in 3,157 deals.

Iheanyi Nwachukwu