Equities pendulum may swing further south

Though, many schools of thought within the Nigerian stock market expect bargain-hunting activities in the trading sessions ahead, but with no much positive information capable of driving their optimism, the market only looks good for another negative close as investor’s apathy towards equities is seen persisting.

There is no doubt among many market watchers and analysts’ that over N114billion investors lost in the equities market last week may have only squashed expectations that recent portfolio confirmation of Ministers would help stimulate stocks buyers at equities market.

Stocks trading at the Nigerian Stock Exchange kicked-off this week on a negative note causing the benchmark indicator to head south by 1.07% while the Year-to-Date (ytd) return routed further negative in excess of 17percent.

In an ideal market scenario, current cheap valuations of most equities pose opportunity for short-term gains, but current trend looks different as stock buyers have no control over economic factors limiting their appetite for equities.

Recall that last week, investors’ weak sentiment reflected on Nigerian stock market which lost about N114billion in the five-day trading week to Friday November 11, 2015. The All Share Index (ASI), a benchmark indicator that tracks performance of Nigerian Stock Exchange (NSE) routed further south by 1.29 percent, from week-open level of 29,175.35 points to 28,798.67 points. Also, the equities market capitalisation closed at N9.915 trillion, from a high of N10.029 trillion.

“We believe this week will likely be more of the same for equities, as the market continues to search for momentum triggers. However, over the next couple of weeks, a combination of attractive valuations from well beaten stocks as well as clarity on the macro front will likely drive a pick-up in equity play, with investors’ attention on cyclical year end opportunities. We encourage position-taking ahead of this expected rally”, research analysts at Lagos-based investment house, United Capital plc said in their latest investment views.

“If investors’ apathy towards the equity market continues, the market may remain in the bearish territory this week” according to research analysts at Lagos-based investment bank, Dunn Loren Merrifield.

They analysts had noted that the domestic equity market could not avoid its consecutive weekly decline “as weak investors’ sentiment weighed on prices across the bourse”.

“We expect to see a mixture of bargain hunting and profit taking activities in a rather lackluster market setting”, said market analysts at Cowry Asset Management Limited.

Research analysts at Meristem said the stock market remained pressured last week “as underwhelming results releases and generally negative sentiments seemingly weighed down price returns.”

“Although we note that the current level of interest rates may benefit the equities market over the mid-term provided the current levels persist over the same horizon. We anticipate that activities will mirror those of this week, with trading activities resulting in spikes in prices on which players may attempt to capitalize,” Meristem analysts added.

“The market may stage a rebound this week as waves of positive sentiments following the inauguration of cabinet members flows into the market,” said Rotimi Peters led team of economic intelligence in their recent market analysis and outlook.

Iheanyi Nwachukwu