Stock market tilts in favour of bargain hunting

Activities of bargain hunters are impacting positively on the performance of the Nigerian stock market, making more analysts to further favour the bull in their expectations from the market this week.

As bargain hunting peaks, the stock market advanced further this week – evidenced on the performances of its benchmark indicators.

In the first-half (H1) to June 2014, improved buying pushed equities prices high with relative returns put at about 2.79 percent, making analysts say the market now stays positive.

As H1 earnings season fast approaches, the possibility of witnessing further price appreciation around value stock remains high as many investors take position in those stock to balance their portfolio for short-to-medium term gains.

Market watchers at Custom Street believe that the current mood at the Nigerian bourse reflects equity buyers’ strong appetite for value stocks at their current price levels.

Many also believe that at current price levels, the Nigerian equities market remains attractive with a P.E ratio of 13x, compared with its peer average of 22.84x.

Now is a good time for investors to add to investments in emerging and global markets, J.P. Morgan said, early this week.

“We held a cautious stance on Emerging Market (EM) plays for more than two years, favouring euro recovery theme, but have last month started to add to the space,” J.P. Morgan’s European equity-research team said in a note.

“As the global and EM activity backdrop improves, we think these valuations may start to look increasingly compelling to investors,” they said in the note.

Market analysts at Access Bank plc said that the stock market might likely maintain the optimistic mood in anticipation of increased interest from investors.

“Activities at the NSE ended last week on a bullish note, as gains by blue-chip stocks lifted the market – ending three consecutive weeks of negative performance,” they noted.

Last week, the NSE All-Share Index (ASI) and market capitalisation appreciated by 2.57 percent to close Friday at 42,187.62 and N13.930 trillion, respectively. Five of the NSE indices appreciated during the week in review with the exception of the NSE Insurance Index (0.40%) and NSE Oil and Gas Index (10.29%). Meanwhile, NSE ASeM index closed flat.

Taking a cue from this performance, Cowry Asset Management analysts said: “This week, we expect to see a mixture of bargain hunting and profit taking.”

Meanwhile, UBA Capital analysts in their investment views this week said: “We believe the market will close relatively flat this week; position taking ahead of Q2 results will be balanced by profit-taking activities in response to last week’s gains – though we expect more activities in the fixed income space, which will put pressure on yields.”

Iheanyi Nwachukwu