• Friday, March 01, 2024
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Speculators besiege Nigerian equities as profit-taking weighs

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With over N400billion in value increase at the Nigerian equities market last week, speculators surely had their field days. This development has now ushered in increased activity of profit-takers who want to leverage on recent stock price gains to cushion their previous losses when equities were subdued.

Though, the Nigerian stock market kicked-off this week on a negative note, reflecting profiteering activity, analysts are still optimistic that the market could rebound on improved bargain activities.

This could result from investors’ interests in downbeat but value stocks – a development which is capable of offsetting any negative impact on the Nigerian bourse performance this week.

Despite the increasingly attractive valuation of some value stocks at the Nigerian Stock Exchange, analysts still see the country’s weak macros fuelling more speculative behaviour in the market in the near term.

In the trading week to August 7, 2015, Nigerian bourse witnessed improved turnover of 2.382 billion shares worth N18.989 billion in 19,769 deals in contrast to a total of 1.366 billion shares valued at N17.953 billion that exchanged hands the preceding week in 17,391 deals.

“Looking ahead, we anticipate profit-booking activities may drive performance gauges lower this week,” according to team of economic intelligence at Access Bank plc. Who noted that the stock market gained momentum last week to reverse previous nine-week losing streak.

Equities recorded improved buy activities at the early trading days of last week, though the gains were later moderated by profit taking activities towards the end of activities last week.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) appreciated by 4.18percent and closed last Friday at 31,441.71points from 30,180.27 points at the beginning of deals. The equities market capitalisation rose by about N431billion to N10.777trillion from N10.345 trillion. Similarly, all the sectoral indices finished higher in the review week, with the exception of NSE ASeM index that closed flat.

“Amid negative sentiments which have pervaded the bourse in recent weeks, we anticipate some bargain hunting as beat down value stocks present buy opportunities,” said research analysts at Cowry Asset Management.

Summary of price changes shows that thirty-seven (37) equities appreciated in price during the review week, higher than sixteen (16) equities in the preceding week. Twenty-nine (29) equities depreciated in price, lower than fifty-five (55) equities in the preceding week, while one hundred and twenty four (124) equities remained unchanged, higher than one hundred and nineteen (119) equities recorded in the preceding week.

“We note the increasingly attractive valuation of value stocks in the market, a trend we think accounted for the bullish run recorded last week. We expect the weak macro backdrop to fuel more speculative behaviour in the market in the near term. We therefore look to see more profit-taking this week, slightly offset by bargain hunting steered by attractive valuation”, team of research analysts at United Capital said.      

Recently in their monthly economic news and views at executive breakfast meeting of Lagos Business School, analysts at Financial Derivatives Company Limited noted that Nigerian stock will remain bearish “as poor H1 results continue to dampen investor confidence.

The analysts said that market performance will remain subdued in the absence of a firm policy direction, adding that key appointments will serve as the much desired catalyst for a market rally. “Currency devaluation will attract foreign institutional investors and stimulate the market,” they noted.

 Iheanyi Nwachukwu