Market sentiment favours bargain hunters

Having been battered in 2014, stock investors expectations are high in 2015, as they look out for investments that offer higher returns at the stock market.

Though, the stock market ended last year with negative returns in excess of 15 percent, the low level of stock prices portends opportunities for bargain hunters to take position in value stocks ahead of market rebound.

In line with market sentiment in favour of value hunters, the Nigerian stock market has this week recorded increased buying, which also helped to prop-up the market’s performance indicators.

This came despite analysts fear that macroeconomic and other specific indicators still do not support a bullish run on Customs Street.

Analysts’ conservative stance around equities results from their concern over macro uncertainty and outcome of 2015 election.

Last week, the NSE All Share Index and Market Capitalisation appreciated by 13.60 percent to close on Wednesday at 34,428.82 points and N11.402 trillion, respectively.

Similarly, all the indices progressed higher in the review week with exception of the NSE Alternative Securities Market (ASeM) Index that remained flat.

Notably, it was a brief trading week, because the stock market opened for three days as Thursday and Friday were declared Public Holidays to celebrate the Christmas and Boxing Day holidays. The NSE All-Share Index (ASI) opened last week at 30,306.51 points and closed the week at 34,428.82 points, adding 4,122.31 points.

Amid this feat, analysts said they expect investors to see recent decline in the value of stocks as opportunity to take position in value stocks in anticipation of higher returns particularly in 2015.

“We expect that the positive sentiments in the market might continue till the end of the year as discerning investors take position due to the low level market prices of most counters, especially in the services sector,” according to market analysts at Meristem Securities Limited.

“This week, we anticipate bargain hunting activities in line with recently renewed investment appetite,” analysts at Cowry Asset Management Limited, said.

Last week, the stock market closed on a positive note to reverse downward trend witnessed in the preceding week.

“We expect the market to remain around current levels as blue-chip companies prepare to release performance figures,” said investment analysts at Access Bank plc.

“Notably, beyond bargain hunting effect on the market, recent rally may have been supported by year-end portfolio rebalancing/pumping practice of fund managers. With bellwether stocks trading at new high levels, despite weak outlook on corporate earnings, we remain conservative on the equity market, especially as concern over macro uncertainty and election reinforce our stance on the broad market,” said the research team of Associated Discount House Limited.

“We note the bullish run witnessed in the market last week and expect the mood to flow into this week, though at a lower momentum. However, given that macroeconomic, market and sector specific indicators still do not support a bullish run, we still expect cautious and weak appetite by investors to dominate trading this week. This said, we expect the market to trade sideways this week in favour of the bears,” said market analysts at UBA Capital plc.

Iheanyi Nwachukwu