In the wake of -2.14 returns recorded by the Nigerian equities market last week, analysts are optimistic that the market will begin to witness an uptick this week driven by third-quarter (Q3) earnings releases by companies.
Investors had found solace in the bond market, but early this week the bond market was quiet, with the yield curve closing flat; and dealers confirmed that soft ease in yields at the short-end balanced out modest rise in yields at the long-end of the yield curve.
Analysts foresee the Nigerian equities market witnessing increase in demand, an expectation that will favour investors who have taken position in value stocks, and will have reasons to smile in terms of returns from capital appreciation.
“We expect a minimal rebound in coming weeks as gains from investors’ position-taking into companies with impressive 9M results is expected to outweigh the panic in the banking sector consequent upon banks’ adoption of Basel 2 risk weightings,” say Meristem analysts.
“We are of the opinion that the market direction will be largely determined in coming weeks by the nature of earnings scorecards posted by listed companies, even though technical indicators point to a possible halt in losses for the coming week, ” these analysts add.
According to analysts at Associated Discount House Limited, “even as the NSE ASI is technically due for a correction, we do not see any fundamental upside to Nigerian equity market in the near term, thus reinforcing our conservatism on equities.”
They add: “The Nigerian equity market opened the week on a bearish note, as the benchmark index (NSE ASI) closed 97bps lower, putting the YTD loss at 3.1 percent. The market breadth was negative (0.5x – 16 gainers Vs 35 losers) and activity level was weak; N2.8 billion turnover. We do not expect any catalyst in the near term, given mixed outlook on Q3 earnings season.”
“While we expect Q3:2014 earnings to drive some level of market rebound, we do not see any near- term catalyst driving the market this week; rather, we expect to see a mix of bargain hunting and sell pressure, which could spur intermittent gains and losses,” according to UBA Capital analysts.
In the week to October 10, 2014, the NSE All-Share Index and Market Capitalisation depreciated by 1.60 percent to close at 40,444.39 points and N13.354 trillion, respectively.
“Barring unforeseen factors that could make it otherwise, we expect the market for the remaining part of the year to recoup part of the losses it has made for the year,” market analysts at BGL say in their recent market outlook.
Accordingly, the analysts note that, “expectation of impressive year-end results and attractive corporate actions by listed companies and increasing primary market activity will still lead to positive sentiments for the equities market.”
Similarly, all the indices depreciated during the week with the exception of the NSE Consumer Goods Index that rose by 0.37 percent. However, the NSE ASeM Index closed flat.
Recall that it was another brief trading last week as the Federal Government of Nigeria declared Monday and Tuesday, October 6 and 7, 2014, as public holidays in celebration of the Eid-el-Kabir.
Meanwhile, the stock market recorded a turnover of 1.351 billion shares worth N14.471 billion in 14,680 deals in contrast to a total of 2.588 billion shares valued at N24.902 billion that exchanged hands the preceding week in 18,750 deals.
The Financial Services Industry (measured by volume) led the activity chart with 673.157 million shares valued at N7.011 billion traded in 7,922 deals; thus, contributing 49.84 percent and 48.45 percent to the total equity turnover volume and value, respectively.
The Conglomerates Industry followed with a turnover of 523.359 million shares worth 3.187 billion in 1,056 deals. The third place was occupied by Services Industry with 70.653 million shares worth N176.367 million in 629 deals.
Iheanyi Nwachukwu
