Amid a positive take-off this week at the Nigerian bourse, the bulls are set to steer the wheels of equities market as investors position for releases of full-year financials by some quoted companies, particularly those known for their tradition of corporate actions in the form of dividend payments and bonuses.
Before now, analysts had advised investors to take position in some underpriced valuable stocks. Following this advise, many stock holders are holding on to their valuable stocks, while those who are yet to add such to their portfolio are reconsidering their decision in favour of equities, thereby helping to strengthen the pricing of some value stocks that are trading below their projected values.
Already, with the release of positive full-year 2012 financials for some blue-chip companies boosting market optimism, market watchers are pointing to cooling interests on bond market among offshore investors in favour of equities.
Rising from previous sell-offs in preceding weeks, the Nigeria stock market index was mildly positive last week with gains recorded by most highly capitalised companies helping to lift the All Share Index (ASI) to a high of 17.35 percent year-to-date (ytd).
Looking into the market this week, analysts at Meristem Securities Limited tell INVESTOR that most stocks appear to be fairly priced fundamentally.
They say: “We see investors as being cautious with significant buys. However, this is pending when results start coming out even though we advise position taking in some underpriced valuable stocks.
“We see 2012FY result releases and companies’ corporate actions, particularly from the banking sector, as the major driver for market return in the week ahead. We do not expect significant gains this week though we note that attractive corporate actions may buoy positive returns. We forecast a gain of <0.5 percent for the week.”
A team of Access Bank plc economic intelligence says: “We expect equities performance to continue to improve on positive sentiment.
“Recent plans to revamp the NSE second-tier market to an Alternative Securities Market (ASeM), to enable emerging Small and Medium Enterprises (SMEs) participate and access finance from the capital market is expected to further enhance investor buy decision.”
FBN Capital analysts say they welcome the fact that the market has cooled since its surge in January, noting that offshore investor sentiment is robust for frontier markets, fuelled by the monetary stance in the US and other developed countries.
On the results, the analysts say: “The reporting season for Q4 2012 for non-financials has produced a series of largely mediocre results. The valuations are generally more attractive for banks, which have yet to report for Q4.”
Analysts at Partnership Investment Company plc said: “The market could do with some good news at this time, especially as lethargy is creeping into the market. While we remain bullish on the equities market, it is obvious that investors prefer to play on the side of caution as market behaviour in the last two weeks have shown.”
They said: “Improvement in liquidity this week may rub-off on the market and we may see the market recording some gains. However, a more enduring expectation is the release of year end results by companies in the Financial Services sector which is the major sector driving the market.”
“The release of bank results in the next few weeks will give a better perspective of the market direction. Though there is anticipation of a few results that may be below expectation, but overall, we expect that the banks’ result will give investors something to cheer about,” Partnership Investment Company plc analysts added.
They are also advising investors to expand their exposure to the equities market, noting that current sell down creates bargain opportunities. “The target should be for value stocks with good fundamentals.”
Sewa Wusu, head, research & investment advisory, Sterling Capital Markets Limited told INVESTOR that they expect investors to consolidate their position in value stocks based on strong fundamentals coupled with the history of corporate earnings and benefit declaration.
“We also foresee an increased positive sentiment towards the market given the low interest rates environment in the money market. This should elicit investment switch in favour of the stock market, particularly as market earnestly awaits the release of impressive results and benefit declaration. At the same time, one cannot
also rule out the likelihood of a cautious trading should corporate earnings not meet investors’ expectations in terms of benefits. All said, we anticipate a bullish market,” he added.
The NSE Insurance Index has outperformed the entire equities market with year-to-date gain of 30.72 percent recorded last week, followed by 29.87 percent gain recorded by NSE Oil/Gas Index; 21.12 percent by NSE Banking Index; 19.09 percent by NSE – Lotus Index; and 16.06 percent gain in NSE Consumer Goods Index.
A turnover of 2.550 billion shares worth N21.694 billion in 29,335 deals was recorded last week on the floor of the Exchange in contrast with a total of 1.928 billion shares valued at N20.990 billion that exchanged hands the preceding week in 28,832 deals.
Summary of bond trading at the Exchange showed 2,020 units of FGN bonds valued at N2.422 million were traded last week in 20 deals in contrast with 2,536 units valued at N3.096 million transacted the preceding week in 26 deals.
Details showed that investors exchanged 100 units of 15.10 percent FGN April 2017 worth N114,750; 100 units of 15.10 percent FGN April 2017 worth N114,950; 100 units of 15.10 percent FGN April 2017 valued at N115,000; 120 units of 15.10 percent FGN April 2017 worth N137,580; 100 units of 16 percent FGN June 2019 worth N122,650; 100 units of 16 percent FGN June 2019 valued at N122,850; 100 units of 16 percent FGN June 2019 valued at N122,950; 100 units of 16 percent FGN June 2019 worth N123,000; 100 units of 16.39 percent FGN January 2022 valued at N115,000; 100 units of 16.39 percent FGN January 2022 worth N129,000; 100 units of 16.39 percent FGN January 2022 worth N129,100; 100 units of 15.10 percent FGN April 2017 valued at N114,120; 300 units of 10.50 percent FGN March 2014 worth N301,710; 100 units of 16.39 percent FGN January 2022 worth N131,950; 200 units of 16.39 percent FGN January 2022 valued at N264,000; and 200 units of 16.39 percent FGN January 2022 valued at N263,700.
Stories by IHEANYI NWACHUKWU