• Saturday, June 15, 2024
businessday logo

BusinessDay

Buy fundamentally sound stocks to reduce risk

Nigeria’s stock market goes the Bull lane
As Nigerian investors prepare for equities trading this week, we continue to advise that they seek opportunities in only fundamentally sound stocks so as to hedge against risk of losing more money. 
The cautious approach is important considering that stock investors are still caught in the web of negative return year-to-date of -6.04 percent. 
 
Though, in the trading week ended August 21, all other sectoral indices finished higher with the exception of NSE Oil/Gas, NSE Lotus and NSE Industrial Goods Indices which depreciated by 0.92percent, 0.12percent and 0.41percent while the NSE ASeM Closed flat. 
 
The market was largely dominated by the bulls because more investors chose to take advantage of cheap valuations banking, insurance and consumer goods counters.
 
“Our view continues to favour cautious trading as risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions”, said equity research analysts at Lagos-based Cordros Capital.
The National Bureau of Statistics (NBS) had released the Consumer Price Index (CPI) figure for July 2020. The report showed an increase in the index by 12.82percent year on year  (YoY) (versus 12.56percent in June 2020). The rise in headline inflation was driven by the surge in the Composite food index, up by 15.48percent YoY.
With so much bullish news in recent weeks, the fact that oil prices have failed to break out does not bode well for markets in the coming weeks. Last Friday, Brent crude futures settled at $44.35 a barrel, down 55 cents or 1.2percent. Also, America’s West Texas Intermediate futures settled at $42.34 a barrel, falling by 1.1percent. Brent fell about 1percent for the week, while WTI saw a weekly rise of nearly 1percent.
The Nigerian Stock Exchange (NSE) All-Share Index appreciated by 0.09percent to close last week at 25,221.87 points while the value of listed stocks increased to N13.158 trillion respectively.
Thirty-one (31) equities appreciated in price during the review week, higher than twenty-nine (29) equities in the preceding week. Twenty-seven (27) equities depreciated in price, lower than thirty-three (33) equities in the preceding week, while one hundred and five (105) equities remained unchanged, higher than one hundred and one (101) equities recorded in the preceding trading week.
“We expect the level of bargain hunting activities to continue in the Banking sector, as investors continue to take position ahead of interim-dividends declaration. Also, with the gradual opening of social activities in the country, we expect shares in the Consumer goods sector to be positively patronized”, said equity research analysts at Vetiva Securities.
The total turnover of 950.414 million shares worth N10.123 billion in 16,647 deals were traded in last week by investors on the floor of the Exchange, in contrast to a total of 1.327 billion shares valued at N13.934 billion that exchanged hands last week in 19,392 deals.
The Financial Services industry (measured by volume) led the activity chart with 624.278 million shares valued at N6.181 billion traded in 8,313 deals; thus contributing 65.68percent and 61.06percent to the total equity turnover volume and value respectively.
The Consumer Goods industry followed with 96.320 million shares worth N2.199 billion in 3,148 deals and the Conglomerates  industry, with a turnover of 89.376 million shares worth N145.612 million in 757 deals.
Trading  in  the  top  three  equities  namely  Zenith  Bank  Plc,  Guaranty  Trust  Bank  Plc  and Transnational Corporation of Nigeria Plc. (measured by  volume) accounted for 298.901 million shares worth N4.761 billion in 3,056 deals, contributing 31.45percent and 47.03percent to the total equity turnover volume and value respectively.