Amid declining yields on fixed income securities which have increased the attractiveness of the equity market, the market is still awash with diverse views from research analysts.
Their mixed sentiments follow a record 2.14percent decline in March 2019, and an observed drop in market activity despite the release of impressive earnings and corporate actions.
Barely three weeks into the second quarter (Q2) most analysts expected that bargain hunters should begin to take advantage of cheaply priced stocks while others guide investors to trade cautiously in the short term in the absence of positive catalysts.
“Most of the stock markets that we monitored appreciated in Q1 2019 except the NSE All-Share Index and GSE Composite Index (Ghana)”, FSDH research said.
In the trading week to April 12, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) and Market Capitalisation depreciated by 0.19percent to close the week at 29,560.47 points and N11.103trillion respectively.
Summary of price changes show that 35 equities appreciated in price during the review week, higher than 14 in the preceding week. Thirty-one (31) equities depreciated in price, lower than 55 equities in the preceding week, while 101 equities remained unchanged, higher than 98 equities recorded in the preceding week.
At the beginning of trading this week, Nigeria’s stock market was unable to sustain gains recorded the preceding trading day as many investors chose to take profit in some bellwether stocks.
Market watchers noticed how late session dip in Dangote Cement Plc reversed earlier session gains, causing the stock market to retreat after gaining for the three consecutive sessions at the end of last week.
“Looking into the new week, we expect bargain hunters looking to take advantage of cheaply priced stocks to guide sentiments in the near term as RSI hovers below its oversold region”, said United Capital research analysts.
“We expect to see profit taking activities in some bellwether stocks which could potentially drive negative returns in the NSE ASI. However, we maintain a cautiously optimistic outlook as investors’ sentiment show signs of improvement,” Afrinvest research analysts said.
Vetiva research analysts who foresaw the index gaining at the beginning of this week “in the absence of unforeseen events”, also expect market activity to remain low to average “as market players remain cautious”.
In their outlook for the month of April, FSDH research analysts expect some factors to drive performance of the equity market in the short-term.
They include: portfolio realignment in favour of the equity market on account of the drop in yields on fixed income securities; stability in the foreign exchange (FX) market; inflow of FPI; and rising crude oil price. FSDH Research expects portfolio allocation in favour of the equity market very soon, adding that “this may lead to an appreciation in the equity market in April”.
The analysts want investors to position in stocks that have good fundamentals that are currently trading below their fair value. They also expect investors to take position in stocks that have a history of good dividend payment; as well as see opportunities in the banking, consumer goods, building materials, and oil and gas sectors of the equity market.
Meanwhile, Cordros Research analysts had in their April 10 update noted that in the absence of a positive catalyst, “we guide investors to trade cautiously in the short term”, adding that stable macroeconomic fundamentals and compelling valuation remain supportive of recovery in the mid-to-long term.
Iheanyi Nwachukwu
