The Nigerian stock market will still witness sessions of cautious trading this week as risks to upside trends remain.
While the overall outlook for equities performance in this second half (H2) remains murky, and companies continue to churn out unimpressive half-year results due to Covid-19 Pandemic, investors going to the Nigerian Stock Exchange (NSE) this week are advised to seek trading opportunities in only fundamentally justified stocks.
“Events of the first-half (H1) of the year caution against an overly optimistic outlook for the second half”, according to Afrinvest research analysts.
Though, they envisage that the recovery pattern in late H1:2020 would be sustained “due to an improvement in risk appetite mostly from the locals and an improvement in external conditions”.
They noted that “the downside risks to our expectation include tightening of the partial economic reopening due to new wave of the COVID-19 spread, lower oil prices, MSCI’s classification of the Nigerian market as a standalone, continued FX illiquidity and weaker than anticipated economic and earnings growth”, Afrinvest analysts added.
Amid sessions of ups and downs in the trading week ended July 24, the stock market still closed on a positive note.
“We expect the market to maintain this trading pattern in the next session,” said FBN Quest research analysts.
Last week, the Nigerian Stock Exchange (NSE) All Share Index (ASI) advanced by +0.58 percent while the negative return year-to- date stood at -8.99 percent. Stock investors gained N72billion in the review trading week.
The market defied the odds of mixed trading session to close in green zone following gains in largely capitalised stocks ( NSE 30 increased most by +0.72 percent).
“Our view continues to favour cautious trading owing to the fact the gains recorded last week were not broad-based. We reiterate that risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions. Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks”, Cordros Capital research analysts said in their recent note.
The NSE All-Share Index and Market Capitalisation both appreciated to close last week at 24,427.73 points and N12.742trillion respectively as against week open low of 24,287.66 points and N12.670 trillion.
“Though the index ended the week with a positive performance (+0.58 percent week-on-week), the market however remained pressured evidenced by four of the five major sectors closing south, while also settling at the negative territory in four of the five trading sessions of the week”, said equity research analysts at Lagos-based Vetiva Securities.
The analysts believe the direction of the market in a new week will largely be dictated by the tone of earnings results released by bellwether stocks.