Investors offload stocks… scanty FY’12 financials linked

After a long wait for more Full Year (FY) financials of companies to berth, particularly banks and other blue-chip stocks, investors appear to be gradually losing patience in their previous decisions to hold stocks.

Market analysts believe the recent sell-off in the market that last week caused the market to lose 2.10 percent or about N200 billion is an indication that most investors may have began to change their decisions out of equities investment.

With the expectation of other companies’ financials, few days into the third month of the year, only two companies – Nestle Nigeria plc and Nigerian Breweries plc had submitted their financials at the Nigerian Stock Exchange (NSE).

Analysts at Meristem believe that while a number of stocks currently trade close to or above their 2013 intrinsic value, the announcement of 2012 earnings and corporate actions remain the most obvious catalyst in the short term. “We expect the dividend/bonus announcements to start coming in this month. This should push the index north, albeit marginally,” they add.

According to Cowry Asset Management analysts, “The equities market fell on bear territory having witnessed three out of five days of profiteering, especially on high caps. Total deals and transacted volumes decreased by 13.39 percent and 26.52 percent. This week, we are overweight on the bulls bargain hunting dominates trading activities ahead of more corporate releases.”

There are already indications that First Bank proposes to release its FY’12 result in the last week of March; Zenith Bank (mid-March); GTBank (mid-March); UBA (first to second week of April); Access Bank (mid-March); Skye Bank (late March to early April); Diamond Bank (second half of March); FCMB (last week of March); Fidelity Bank (second half of March), and Stanbic IBTC Bank (mid to late March).

Index/price movement

Except for banking and oil/gas stocks indexes, which after gaining 21.33 percent and 24.99 percent, respectively, have outperformed the Nigerian bourse index that lowered to 18.18 percent last week; blue-chips stocks index dropped to 18.67 percent, consumer goods stocks index declined to 15.51 percent, insurance stocks index dropped to 25.16 percent; Shar’ia complaint stocks also lowered to 21.27 percent.

Review of the equity price movements last week showed that 38 equities gained while 46 equities recorded price declines and 113 equities remained constant. This is compared with the preceding week, 38 equities that gained while 55 equities recorded price declines and 104 equities remained constant.

The outlook

The Nigerian stock market began 2013 on positive note driven among others by renewed investor confidence, and interest in stock perceived to have been trading below market value. This is in addition to most investors’ belief that releases of improved Full Year 2012 financials and corporate actions in form of dividend and bonuses would help to spur price rally. Consequently, trading activities were impressive as equities became a more attractive asset class.

Market watchers have observed that the trending down of bond yields and money market rates helped to reduce the appeal of fixed income securities to most investors. This is in addition to unattractive returns witnessed in the western economies, especially Europe, which helped to increase the rate of capital inflows into emerging market exchanges such as Nigeria’s.

Market analysts at Financial Derivatives Company have in their bi-monthly economic and business update expressed their belief that the market will continue in its long-term growth track this year, noting that “our growth forecast of a 25 percent rise in the All Share Index (ASI) remains on course to be achieved this year. We are however cautious about the current run. Already, we have seen profit taking on several banking and consumer goods stocks that appreciated in the last three months.”

Stories by IHEANYI NWACHUKWU