Stock market tilts toward bargain-hunting, pockets of profit-taking

Nigerian stock market looks set for another round of choppy gain, to be driven by expected increase in bargains as equity investors move to consolidate their equity positions ahead of more corporate rewards.

More listed companies are expected to approach the local bourse for their Full Year 2015 numbers in their renewed move to beat regulatory deadline for submission.

Amid these positives, there is the possibility of witnessing some level of profit-taking by some investors who may be taking advantage of recent capital appreciation to hedge against previous losses.

Most stock buyers have routed to the sideline at the Nigerian Stock Exchange (NSE) as the widening FX risks hit harder on stocks and led to record exit of foreign investors.

The stock market became even worse-off as fall in price of crude oil, Nigeria’s main export contributed to decline in petrodollar earnings with negative impact on foreign reserves. Amid investors increasing push for official pronouncement on naira devaluation, President Muhammadu Buhari over the weekend rejected the idea of devaluing the West African nation’s currency, despite a hammering of the naira at the parallel market last week. Investors at the Nigerian Stock Exchange (NSE) lost about N88billion last week as equities supply outweighed demand in the wake of widened FX margins at the parallel market.

The NSE All-Share Index (ASI) depreciated by 1.04percent to close last week at 24,432.51 points from 24,689.69 points.  The market capitalisation of listed Nigerian equities decreased to N8.403 trillion from N8.491trillion at the beginning of the review week.

“We anticipate bargain hunting activities as investors await positive corporate actions announcements”, analysts at Cowry Asset Management said in their recent market outlook.

“While we anticipate that the market will remain volatile in the interim, we are of the view that the lower valuations may persist for the most part of the year with FY’15 results and future estimates expected to head lower”, research analysts at Dunn Loren Merrifield said in their equity market brief.

“We expect gains to be sustained in the coming sessions albeit with further sideways trading” analysts at Lagos-based investment firm, Vetiva Capital Management Limited said in their recent equity research.

“With the domestic macro terrain still hazy, we think investors will continue to favor a short term approach to equities which will likely see a blend of profit taking and cherry picking this week. That said, we think the appeal for attractive dividend yield will remain strong, which gives a slight edge to the bulls. Hence, we expect the equities market will remain within a tight range for the most part, but close the week marginally higher”, said analysts at United Capital plc.   

Analysts at Meristem Securities anticipated that trading activities this week will be filled with bargain hunting actions, “with pockets of profit-taking setting in from investors.”

They expect investor sentiment this week to be swayed in the direction of positive news inflow from companies as financial scorecards continue to trickle in.

Stock market in review

NSE weekly market report shows that all other Indices finished lower last week, with the exception of the NSE Main Board Index, NSE Banking Index, NSE Consumer Goods Index and NSE Oil and Gas that appreciated by 0.95percent,  0.04percent, 0.21percent and 3.30percent respectively, while the NSE ASeM index closed flat.

Twenty-two (22) equities appreciated in price last week, lower than twenty-six (26) equities in the preceding trading week. Thirty-seven (37) equities depreciated in price, higher than thirty (30) equities in the preceding trading week, while one hundred and thirty-one (131) equities remained unchanged, lower than one hundred and thirty-four (134) equities recorded in the preceding week. A turnover of 1.202 billion shares worth N9.641 billion in 13,712 deals were recorded last week on the floor of the Exchange in contrast to a total of 1.407 billion shares valued at N17.277 billion that exchanged hands the preceding week in 14,914 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.005 billion shares valued at N6.471 billion traded in 8,313 deals; thus contributing 83.66percent and 67.12percent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 54.333 million shares worth N2.114 billion in 2,365 deals.

Trading in top three equities namely – Zenith International Bank Plc, Guaranty Trust Bank Plc and United Bank for Africa Plc (measured by volume) accounted for 500.360 million shares worth N5.449 billion in 4,011 deals, contributing 41.63percent and 56.52percent to the total equity turnover volume and value respectively.

The Zamfara State Government N7billion 17% Fixed Rate Development Bonds due 2022 was admitted to trade at the Exchange last Friday February 19, 2016. Also, additional volume of 40million and 50million units were added to 15.54%FGN FEB 2020 and 12.50% FGN JAN 2026 bonds respectively on February 17, 2016.

Also traded during the week in review were a total of 93,518 units of Exchange Traded Products (ETPs) valued at N1.158 million, executed in 48 deals, compared with a total of 115,641 units valued at N1.285 million traded the preceding week in 28 deals.

A total of 150,000 units of Federal Government Bonds valued at N169.326 million were traded in 2 deals compared to a total of 39,340 units of both State and Federal Government Bonds valued at N44.246 million transacted the preceding trading week in 3 deals.

 Iheanyi Nwachukwu