Mixed sentiments trail equities as H1 earnings season fades

In the wake of recent outburst of the bear reign in the Nigerian equities market, blend of opinions continues to trail the performance of the market this week.

While many schools of thought favour the mix of profit-taking and bargain-hunting, others are optimistic that investors will sought to increase their equities holding on impressive blue-chips results and accompanying corporate declaration.

Some others believe that there is no major news that will trigger market uptick, particularly, as the half-year (H1) earnings season fades away.

Recently, market watchers observe how negative sentiments have continued to pound Nigerian equities. This development reflected on the first two trading days of this week when the equities relinquished over N105 billion of their value in just two day, and helped to re-route the year-to-date (YtD) return into the negative territory. The market had closed last week with YtD return at 0.57 percent.

“We expect market optimism to persist throughout this week given positive financials from blue-chip establishments,” according to market analysts at Access Bank plc.

“We anticipate a mix of bargain hunting and profit taking on the local bourse, as expectations of impressive half-year financials wane,” equity market analysts at Cowry Asset Management Limited, said.

The NSE ASI, which opened this week at 41,564.19 points, was down to 41,235.25 points within two trading days of this week, while the equities market capitalisation was down to N13.615 trillion last Tuesday from N13.724 trillion at the beginning of trading this week.

“With the earnings season winding down, the generally weak earnings performances have failed to drive the index upwards as the NSE ASI has pared by 2.22 percent quarter-to-date (Qtd). With only a few more tickers yet to release results, we expect that the negative sentiment might persist,” research analysts at Meristem Securities Limited, said.

“The bearish session last week can be largely attributed to low level of activity coupled with negative sentiments in most counters due to unimpressive results. The bond market reversed the bearish sentiment as investors went bullish on bond instruments, which drove prices up, depressing yields by 10bps to 11.6 percent on average,” investment analysts at UBA Capital plc, a Lagos-based investment company noted.

Market report for week ended August 22, shows that the NSE All Share Index (ASI) quarter-to-date (QtD) return is in negative of 2.16 percent; NSE 30 yielded negative QtD return of 2.41 percent, and NSE Banking QtD returns was also negative at 3.10 percent. Others indexes quarter-to-date returns are: NSE Insurance (-1.80%); NSE Consumer Goods (-2.65%); NSE Oil/Gas (+2.16%); NSE Lotus II (-3.85); NSE Industrial Goods (+2.02%); and NSE ASeM (+0.11%).

UBA Capital analysts noted: “Despite the negative sentiments witnessed in the equities market last week, the NSE ASI closed the week positive, returning 44 basis points (bps); due to the significant gains by midweek which was followed by bearish sentiment – erasing most of the earlier gains.”

Accordingly, in their investment view available to INVESTOR, these analysts at UBA Capital said “this week, we do not see any major news to trigger a market rebound,” adding that “we expect a low level of activity due to the holiday season. This therefore guides our position of a bearish market for the week.”

Iheanyi Nwachukwu