Mixed feelings trail equities as investors await FY’15 earnings

Investors’ expectations have shifted to the release of full year (FY) 2015 earnings of listed corporates. The early birds are expected to berth with their results at the Nigerian Stock Exchange (NSE) any time from this month. Most value companies with the history of full year dividend payout would witness increased demand for their stocks and a corresponding impact on their pricing.

Meanwhile, as there is still little news to propel stock buying interest, Nigerian equities market remains at the mercy of investors mixed feelings seen to be stalking stocks. While many analysts still expect low priced stocks to usher in bargains hunters in this early part of year 2016, other schools of thought within the market foresee further toss for profits on Custom Street.   

“This week, performance gauges may trend northwards as investors take position ahead of 2015 full year earnings season,” said Rotimi Peters led team of economic intelligences at Access Bank plc. “Bargain hunting is expected to greet the market this week as investors take position on low priced stocks with significant upside potential. However, pockets of selling on the back of recent gains will likely offset gains in the week with the benchmark likely to close marginally negative”, said research analysts at United Capital plc.

“The market started the year on a negative note as the broad market index ended the session 95basis points (bps) lower. While we acknowledge that there was little news to propel investor’s buying interest given the observed relatively low activity, the weak appetite for riskier assets also impacts”, said research analysts at Lagos-based investment house, Dunn Loren Merrifield.

Last week was another brief trading week as the Federal Government of Nigeria declared Monday, December 28, 2015 and Friday, January 1, 2016 as Public Holidays to celebrate Boxing Day and the New Year respectively.

The NSE All-Share Index and Market Capitalisation appreciated by 6.59% and 6.62% to close the review week at  28,642.25 points and N9.851 trillion respectively. Similarly, all other Indices finished higher last week, with the exception of the NSE ASeM Index that closed flat.

Forty-two (42) equities appreciated in price, higher than twenty-six (26) equities in the preceding trading week. Twenty-two (22) equities depreciated in price, lower than twenty-seven (27) equities in the preceding trading week, while one hundred and twenty-six (126) equities remained unchanged, lower than one hundred and thirty-seven (137) equities recorded in the preceding trading week.

Trades on the floor of the Nigerian bourse recorded a turnover of 2.965 billion shares worth N9.364 billion in 7,174 deals, in contrast to a total of 743.117 million shares valued at N6.591 billion that exchanged hands the preceding trading week in 8,325 deals.

“Current stock price of most companies provides attractive entry points and could alter the market secular bear trend. Recent CBN policy signal is bullish ‘credit expansion’, lower yields on government securities will see a reshuffle in asset classes; might favour equity,” said Bismarck Rewane led team of analysts at Financial Derivatives Company Limited in their presentation last month at Lagos Business School. The Financial Services Industry (measured by volume) led the activity chart with 2.760 billion shares valued at N5.174 billion traded in 4,103 deals; contributing 93.06% and 55.25% to the total equity turnover volume and value respectively.

The Services Industry followed with 66.805 million shares worth N203.043 million in 140 deals; while the third place was occupied by the ICT Industry with a turnover of 42.737 million shares worth N21.730 million in 15 deals.

Dunn Loren Merrifield analysts added: “From an investment standpoint, whilst we maintain a keen focus on monetary and economic policies, we are of the view that market unpredictability which prevailed for the most part of 2015 will be sustained in 2016. In addition, we believe much of the activities will be more speculative in nature rather than reflective of long-term investment strategies.”

According to analysts at another Lagos-based investment house, Meristem Securities said: “While we remain confident in our assessment that value remains in the market, we note that participation in the Nigerian equities market is likely to remain tempered in the short-term given the impact of foreign investors and their wariness to participate given their perception that the naira is ‘unfairly’ valued.”

“This, we anticipate will cause a drag to market returns, provided that the apex authority maintains its stoic stance regarding management of the FX market”, the analysts added.

Iheanyi Nwachukwu