• Friday, July 19, 2024
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Profiteering may extend amid speculators strong hold on market

Foreign investors find escape route from Nigeria in dual-listed stocks

If speculative investors refuse to shift in their position at the Nigerian bourse, which led to about N167 billion weekly loss in the value of equities, profit-taking activities will continue this week, market analysts have noted.

Following the release of companies full-year results, particularly companies in the financial services sub sector with many not rewarding investors in form of dividend and bonuses amid impressive financials, activities of speculators at the Customs Street heightened and led to supply side outshining demand for stocks.

The dismal outing by investors at the Nigerian bourse last week impacted the market’s year-to-date (ytd) growth, which dropped to 17.50 percent from above 20 percent recorded before now.

According to Tony Monye-led team of Access Bank analysts, many investors changed their previously bright outlook for impressive financial year 2012 financials, when some companies that recorded positive scorecards failed to declare dividends.

“The Nigerian equities market headed southwards for the second consecutive week, as speculative investors engaged in major sale of high-capitalised securities. Stocks offload, predominantly in the financial and consumer goods sector that had witnessed significant price appreciation in the early period of 2013, impacted negatively on performance indicators,” the analysts said.

“We expect recent investor profiteering to extend into the coming week due to speculator strong hold on the market,” they added.

Partnership Investment analysts said: “With the rates rising in the money market, portfolio and institutional investors may be realigning their portfolio to reflect the market direction.

“The price correction cycle and the cautious mode which the market has engaged may see more funds move back and forth between both markets. However, we expect a more robust stock market trading going forward as institutions seek to take a more bullish approach, especially as many equities have reached new levels.”

Read also: Investors find solace in fixed income as bond market surpasses equity’s by N187bn

In their equity strategy, the analysts said: “We reiterate the need to dwell less on speculation. Investors need to do more of value investing. Investors should take cautious position for value stocks that trade below industry value. Equities in Financial Services and Consumer Goods sectors offer bargain windows.”

Week-on-week, the NSE All-Share Index declined by 520.17 points or 1.55 percent to close last Friday at 32,993.97, while the market capitalisation of the listed equities on the main-board decreased also by 1.55 percent to close at N10.547 trillion.

The NSE 30 Index, which tracks the price movement of blue-chip stocks, depreciated by 25.27 points or 1.58 percent to close at 1,574.85. 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 1.43 percent, 3.74 percent, 1.77 percent, 0.81 percent and 1.03 percent, respectively. However, NSE Insurance appreciated by 1.03 percent.

Meristem Securities analysts said: “In the face of no apparent market catalyst and given that expectations have long been priced in by investors, we envisage that market will shed 100 basis points (bps) by week end. However, current stock prices remain attractive entry points even as we expect slightly impressive Q1 results to steer mild positive sentiment.”

In their view, analysts at Cowry Asset Management said they expect bargain hunting activities in the market this week “in response to the opportunities presented by the recent lull in the market.”

Before now, fund managers at FBN Capital Asset Management had noted: “Going forward, we expect declining rates in the fixed income market, a stable outlook for the naira premised on the steady build-up in foreign reserves, and a dearth of natural supply of equities to continue to provide further support for the equity market.”

“However, we believe the near-term outlook for equities will be most shaped by the performance of quoted companies in Q1 2013, which are largely expected to be modest when analysed on a year-on-year growth basis,” the fund managers said in the FBN Heritage Fund quarterly fund newsletter.

“We expect the impact of lower yields in Q1 2013 versus most of 2012 in the money and fixed income markets, a stable outlook for the naira – premised on the steady build-up in foreign reserves, attractive corporate actions declaration on the back of FY 2012 results, and a dearth of natural supply of equities to provide support for the equity market in April/May. Post this period, our outlook for equities will largely be shaped by Q1 2013 quoted companies results, which are largely expected to be modest when analysed on a year-on-year growth basis.”