Optimism trails Nigerian equities as more scorecards berth

As investors increasingly raise their bet in favour of Nigerian equities, the nation’s stock market further stands the chance to reduce the year-to-date (ytd) loss of 7.25 percent it recorded last week.

Many speculative investors have now seen need to buy into value stocks whose prices were recently rocked when investors’ sentiment shut liquidity flow into Nigerian equities market.

To further justify the positive outlook in favour of stocks this week, the stock market moderated its ytd loss to 6.3 percent after Monday’s trading as the market trading witnessed a bullish weekly start, which helped to add N134 billion to the value of equities. This was driven by heavy trading on banking and fast moving consumer goods sectors shares.

Already, stock market watchers have reiterated their strong appetite for some banking stocks at current market valuation given their compelling fundamentals.

Following the MPC’s decision to leave the MPR at 12 percent and the CRR for public sector deposit at 75 percent (and increase the CRR for private sector deposit from 12% to 15%), which is in line with analysts’ expectation, the Nigerian equities market rebounded last week, recording gains on all trading days of the week.

In the wake of another quarter (Q2), after a loss of 3.10 percent last month, relative liquidity abounds in the market as speculators further revive their buy mood in anticipation of more companies scorecards, which will have attendant positive impact on trading value and volume.

“We anticipate increased bullish activities based on recently announced impressive returns as well as expected returns,” said market analysts at Cowry Asset Management.

“The buoyant mood in the market is partly traced to short-term speculations on expectation of more impressive full-year 2013 results of quoted companies supported by a relatively liquid market. This week, we expect the market to continue to thrive on optimism over financial scorecards with attendant positive impact on trading value and volume,” Tony Monye-led team of economic intelligence at Access Bank plc noted.

Supporting this view, market analysts at Morgan Capital in their Top-5 Nigerian equities league noted that the flurry of released results also helped the market “as investors scrambled for the shares of companies that turned up good performances and declared good dividends.”

These analysts say they expect the positive sentiment to continue this week as the last batch of earnings releases comes through, while also urging investors to “continue to invest based on the principles of sound fundamentals at good entry prices bearing in mind that in a bear market, stocks with good fundamentals have the capacity to retain value, and even when their prices crash, they are the quickest off the mark in price appreciation when the market sentiment becomes bullish.”

Iheanyi Nwachukwu