Positive triggers still scarce for equities

The Nigerian stock market started this year on a negative note as the main performance gauges trended downwards in the first trading week of the year.

The stock market opened this week on a negative note after losing N233billion. Currently, investors are shying away from FX related equity risk which is affecting investible funds inflow into the Nigerian stock market.

The Central Bank of Nigeria (CBN) has now allowed bank customers deposit foreign exchange (FX) in cash directly into domiciliary accounts while the CBN said it will no longer sell forex directly to Bureau De Change (BDC) operators in the country. Both developments analysts said are welcome developments in the financial market which before now was full of uncertainties.

Ahead of the release of full year results of most companies, there are traces that many multinationals will report exchange losses which could act as major drag to investors reward.  Analysts see more investors shying away from opportunities which low priced stocks offer for value hunters –this is more evident in the low hanging blue chips.

Review

Within just five trading days of this year, stock investors at the Nigerian Stock Exchange (NSE) lost about N555billion. Stocks trading began this year with equities market capitalisation valued at N9.850trillion and NSE All Share Index (ASI) at 28,642.25 points.

At the close of trading last Friday, the NSE All Share Index lost 1,613.86 points or minus 5.63percent to close at 27,028.39 points; while the equities market capitalisation declined to N9.295trillion. 

Last week’s decline of about 5.63% from the stock market benchmark index was occasioned by fifty (50) equities that depreciated in price, higher than twenty-two (22) equities in the previous week.

Only seventeen (17) equities appreciated in price during the week in review, lower than forty-two (42) equities in the preceding week. One hundred and twenty-three (123) equities remained unchanged, lower than one hundred and twenty-six (126) equities recorded in the preceding trading week.

Analysts view

Amid this situation, analysts’ views point to a situation that may not change suddenly as there is scarcity of positive news that could trigger buy decisions at the NSE.

“With positive triggers still scarce for equities, we believe market will continue to shed 2015 year end gains, but will likely hit a bottom shortly. Overall we expect a bearish close to the week”, according to analysts at investment firm, United Capital plc.

“This week, market wind suggests selling pressure may continue and further push indicators southwards,” said Rotimi Peters led team of economic intelligence at Access Bank plc.

“As market fundamentals remain weak, the equity market may continue to sail in the bearish waters this week”, said research analysts at Lagos-based investment house, Dunn Loren Merrifield.

After this week Monday’s record loss, the analysts added: “As the market continues to show no signs of recovery, we acknowledged the existence of ‘safe haven effect’ as significant investors are wary about risks despite equity prices being relatively attractive at current levels.”

“Furthermore, as investors continue to keep a close watch on global equity markets downturn; with no sustainable catalyst nearby, there is no clear indication of where the market is headed,” Dunn Loren Merrifield research analysts added.

Iheanyi Nwachukwu