As stock prices continue to record new highs due to investors’ optimism about Nigerian equities, their renewed appetite this year for equities justifies expectation of positive returns from the market in the near future.
Already, analysts are positive in their expectation to see more buy opportunities following market-wide sell-offs in the preceding trading week – a move that will impact upwardly the stocks pricing as well as market-wide returns.
With many investors (retail and institutional) seen going further to take position in value stock ahead of their release of full-year 2013 financials, expectations are high at Customs Street that stocks with good dividend history will sustain another week of gains as investors bet more on them.
As activities of speculators (on expectation of further bullishness) in the market pushed stock prices upwards, the equities market closed positive in the week ended January 10, 2014. The buy pressure driven by speculators, which bedevilled the Nigerian stock market pushed the market’s year-to-date (Ytd) return high at 0.37 percent in the review period.
No doubt, the Nigerian stock market has since this year experienced a mix of bargain hunting and profit-taking activities with the former still dominating.
Investors in equities like IHS plc, Royal Exchange, and Neimeth International Pharmaceuticals plc were most favours respectively in terms of price appreciation, while those that held the shares of Portland Paints and Products Nigeria plc, Conoil plc, and Africa Prudential Registrars plc were most hit in stock value erosion last week.
The share price of Royal Exchange rose from N2.65 to N3.18, adding N0.53 or 20 percent in just one trading week; Royal Exchange rose from N0.55 to N0.63, adding N0.08 or 14.55 percent; while Neimeth International Pharmaceuticals plc, which rose by 11.11 percent or N0.16 from N1.44 to N1.60, also favoured its investors.
On the contrary, Portland Paints and Products Nigeria plc dropped from N5.50 to N4.65, losing N0.85 or 15.45 percent; Conoil plc dropped from N61.32 to N52.40, down by N8.92 or 14.55 percent; while Africa Prudential Registrars plc, which lost N0.36 or 9.84 percent, dropped from N3.66 to N3.30.
As concerns over regulatory pressures continue to weigh on investor appetite for banking stocks, analysts remain upbeat on the fundamentals of Nigerian banking sector, noting that low penetration level and attractive margins are compelling investment themes.
According to UBA Capital analysts, “while mixed macro-economic data from the United States suggests the need to sustain monetary stimulus, with expectation of liquidity flows to emerging markets like Nigeria, concerns over currency depreciation and rising political risks weaken our expectation on foreign portfolio inflow to Nigeria.”
They moderate their expectation on the participation of foreign investors in Nigerian market this year, adding that “renewed appetite of local investors (both retail and institutional) should justify our outlook of a positive return on equities in the year, especially as we look forward to increased asset allocation from the pension funds.”
Year-to-date, all market indexes, except the Industrial Goods Index, Insurance Index, NSE – Lotus II, and ASeM Index have been on the negative. Industrial Goods Index recorded Ytd growth of 2.53 percent; Insurance Index (1.30%); NSE – Lotus II (0.47%), while ASeM Index was positive at 0.07 percent. On the negative are indexes like NSE 30 Index (-0.35); NSE Consumer Good index (-1.33); NSE Banking Index (-2.25); and NSE Oil/Gas Index (-0.86).
Furthermore, Access Bank plc analysts say they expect ease in market liquidity to further support outlook, noting: “It is expected that stock market indices will maintain current trend on account of increasing optimism for further price gain as demand for stocks closed higher than supply last week.”
“Going into the new trading week, we expect investor’s optimism on stocks with good dividend history to sustain another week of gains,” say market analysts at Morgan Capital.
Financial Derivative analysts note that: “The NSE rally of 2013 of 47.19 percent continues but at a more subdued level. Any tightening in stance will bring this rally to a halt and could trigger a correction. However, if rates remain un-changed and there is further loosening, the current bubble may continue bloating.”
By: Iheanyi Nwachukwu