Nigerian equities are set to close the third quarter of 2014 on a bearish note. Stocks fell near a four-month closing low of 40,819.72 points on Friday, as a weaker naira hurt by falling global oil prices dampened appetite for equities.
The NSE All Sahre index is down 1.33 percent year-to-date as heavyweight banking and cement stocks have failed to rally.
Shares in Dangote Cement, Nigeria’s most capitalised stock, have gained just 0.46 percent this year to close at N220 on Friday, while First Bank Nigeria’s largest lender by assets has lost -14.72 percent to N13.90.
Following the loss recorded in the past week, the equities are currently at equilibrium with 19 weeks of gains and losses for the 38 weeks so far in the year.
Several factors ranging from modest companies’ performance scorecards, possible capital reversals (local to foreign participation as of July 14 pegs at 62.53%:37.47%), QE tapering and headwinds around domestic polity among others have led to the bearish trend in the market, with 2014Q3 returns of -3.91 percent.
We believe the bearish run may still persist for the rest of the year, due to the negative headwinds mentioned above.
However, nibbling on oversold names now could help set-up solid gains for the long-term investor, as equities should rebound in the second quarter of 2015, after the elections of February.
We like Dangote Cement, GTB, and Seplat at these levels.
PATRICK ATUANYA & BALA AUGIE
