• Friday, May 24, 2024
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Profit-taking to moderate as bargain opportunities bestow

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The recent sell-off that led to decline in equities at the Nigerian bourse may ease this week as investors clinch the opportunities that low-priced but value-stocks are now bestowing on them.

As investors begin to re-channel investible funds into these stocks, many market watchers believe that it will help to cushion the effect of funds that had hitherto exited the equities market for other investible instrument.

Over N265 billion worth of equities value lost last week impacted negatively on the stock market’s year-to-date (ytd) growth rate which lowered to level of 19.36 percent against the preceding level at 23.97 percent.

As investors dumped shares last week, the NSE All-Share Index declined by 787.23 points or 2.30 percent to close last Friday at 33,514.14, while the market capitalisation of the listed equities on the mainboard decreased by 2.41 percent to close at N10.713 trillion. The market was largely hit by decline recorded in blue-chips.

Week-on-week (WoW), the NSE 30 Index that tracks the price movement of blue-chip stocks depreciated by 38.53 points or 2.35 percent to close at 1,600.12.

According to analysts at Partnership Investment Company plc, “Given the price correction cycle that prevailed last week, we expect more modest easing in the new week. Profit-taking will be moderated by the bargain opportunities. Market figures are still positive. The downturn may be due to activities of portfolio investors who have realigned their position to reflect current market reality.”

These analysts further noted: “Investors need to do less of speculative trading and more of value investing. Many equities may have reached new levels that make them attractive. Equities in banking, consumer goods and agriculture sectors offer opportunity.”

Other NSE sectoral indices that depreciated last week include; NSE Consumer Goods, NSE Banking, NSE Oil and Gas, NSE-Lotus II and NSE Industrial Goods by 0.19 percent, 5.36 percent, 1.40 percent, 0.13 percent and 1.12 percent, respectively. However, NSE Insurance appreciated by 3.86 percent.

Analysts at Cowry Asset Management say following the recent downbeat movement, they anticipate a mixture of bullish and bearish activities “as bargain hunters seek capital appreciation among stocks with strong fundamentals.”

“Market activities were bearish in the period as speculators tilted more towards taking profit from short-term price appreciations. The poor performance may also be linked to portfolio reclassification in favour of US equity indices following recent resplendent returns by international fund managers playing in the Nigerian Stock Exchange. This week, the bumpy trend may persist on domineering posture of short-term investors taking profit, underpinned by rally experienced in Q1 2013,” says Tony Monye-led team of analysts at Access Bank plc.

Taking a look at the market, analysts at Proshare say: “Market outlook reveals improved patronage as stocks regain breadth, though bargain appetite stayed weak as reflected in negative market turnover posture, indicating weak commitment.

“We expect Monday effect to aid bargain appetite in the coming week (that is this week) as some of the anticipated impressive fourth-quarter (Q4) 2012 and third-quarter (Q1) 2013 earnings reports may be the game changer.