Stock market sentiment still favours bears

Trading at the Nigerian stock market may further favour the bears as investors continue to sell shares despite the bargain opportunities seen in most downbeat stocks. 

Already, the stock market’s negative take-off this week gives credence to the belief of most investment analysts that the market will still close negative this week.

Since this month, choppy deals occasioned by uncertainties surrounding the policy direction of the new government have weighed on Nigerian stocks.   

Analysts still doubt the possibility of the stock market rerouting north as there are not much positive news capable of driving the trend.

“This week, we expect to see bear pressure, particularly on underperforming equities in response to the regulatory price floor adjustment,” according to market analysts at Lagos-based Cowry Asset Management Limited.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) and market capitalisation depreciated by 1.88% and 1.44% to close last Friday at 33,664.91 and N11.491 trillion respectively. No fewer than twenty-seven (27) equities appreciated in price last week, lower than thirty-eight (38) equities of the preceding week.  Also, forty-seven (47) equities depreciated in price, higher than thirty-one (31) equities of the preceding week, while one hundred and nineteen (119) equities remained unchanged, lower than one hundred and twenty-four (124) equities recorded in the preceding week. In their recent view on the market, Lagos-based United Capital plc said, “Present bearish sentiment in the market will likely be sustained this week, though we might see a pick-up in market activity towards the close of the week.”

According to the analysts, “We have also considered the bullish run in T-Bills instruments and short tenured bonds; this is not unconnected with the uncertainties in the market. However, we expect to see a reversal in demand in T-Bills should yields fall below 12.0% (current average yield = 12.6%), this will trigger some level of demand in the equities space.”

While reviewing the markets, the analysts had noted that uncertainties trail domestic market. “On the back of uncertainties surrounding the policy direction of the new government, the bears made a comeback into the market with the market trading negative in 3 out of 5 trading days.

The All Share Index was down by 1.9% w/w to settle at 33,664.91pts while market capitalization lost N167.4bn to N11.5trn. Investor’s preference for domestic fixed income securities was sustained last week, average yields on T-Bills and Bond was down by 108bps and 8bps to 12.6% and 14.0% respectively,” United Capital analysts added.

The Nigerian stock market recorded turnover of 1.221 billion shares worth N16.964 billion in 19,847 deals last week in contrast to a total of 1.799 billion shares valued at N22.105 billion that exchanged hands the preceding trading week in 17,337 deals.

The financial services industry (measured by volume) led the activity chart with 935.233 million shares valued at N9.258 billion traded in 11,066 deals; thus contributing 76.58% and 54.58% to the total equity turnover volume and value respectively.  In their bimonthly economy and business update, analysts at Financial Derivatives Company Limited said they expect a gradual improvement in investors’ confidence in H2’15.

They noted further, “The successful completion of the elections has doused the political risk element. Investors that were in a ‘wait and see’ mode are expected to return to the capital market especially after the new administration takes over in June.” Though at the LBS Executive Breakfast Session, the analysts said that “institutional investors are tentative until Buhari’s first policy statements”.

They noted that sentiment in June will remain flat and tentative. “Fundamentals will remain unchanged. Most stocks will bottom out following disappointing earnings. Sustained demand for treasuries and bonds will likely dampen interest in equities. SEC’s deadline for recapitalisation of Capital Market Operators will influence activity,” Financial Derivatives Company added. The Consumer Goods Industry followed with a turnover of 77.298 million shares worth N5.048 billion in 3,144 deals. The third place was occupied by the Conglomerates Industry with 47.348 million shares worth N228.761 million in 1,182 deals.

“As the dearth of investor-motivating news continues to affect the sector performance, we opine that the low ebb of most of the counters will drive discerning investors to engage in bargain hunting, and this might push the sector out of its bearish mood in the shortest time possible”, according to research analysts at Meristem Securities Limited.

The analysts had credited the negative market mood witnessed last week to higher profit taking activities, “over bargain hunting due to investors’ wariness in the absence of a clear direction of investment related policies by the new administration”.

They however expect price appreciations on some counters this week to drive the sector to positive return, “as the current market price of most counters remain depressed”.

“The negative performance was triggered by sell-offs across the oil/gas and banking stocks as investors embarked on profit taking. This week, we anticipate a continuation of current trend as investors await the new president’s economic blueprint,” economic analysts at Access Bank plc said in their market analysis and outlook.    A total of 14,817 units of Federal Government Bonds valued at N17.586 million were traded this week in 5 deals compared with a total of 64,465 units of Federal and State Government bonds valued at N69.372 million traded in 7 deals in the previous week.

Similarly, four indices finished lower during the week, while NSE Consumer Goods, NSE Lotus II, NSE Industrial Goods Indices closed higher by 0.08%, 0.37%, and 0.16% respectively. However, the NSE ASeM index closed flat.

A total of 2,949,933,156 ordinary shares of 50 kobo each at N16.50 per share belonging to Oando plc were admitted to trading on 4th of June 2015.  This arose from a Rights Issue of the company on the basis of one (1) new ordinary share for every three (3) ordinary shares held, thus bringing the total outstanding shares of the company to 12,034,618,894 units. Also, additional warehoused ordinary shares of 482,754 units of 50 kobo each of Pharma Deko plc were admitted to trading on the 4th of June 2015, bringing the total outstanding shares of the company to 216,820,448 units.

 Iheanyi Nwachukwu