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Investors brace up for turbulent week as risks to stocks’ rally remain

Nigerian stock investors should still brace up for more turbulence in the market this week, as some of the risks to sustained rally persist.

Currently, many investors are watching the progress of Nigeria’s states in recent gradual reopening of their economies without fueling a resurgence in Coronavirus (Covid-19) cases.

A pile-up of worrying domestic and international news prompts these investors to pull back on equities after the record rally in April.

Among others, the reoccurring risks to investors decisions to raise equities bet on the Nigerian Stock Exchange include outlook on 2020 economic growth, crude oil price, concerns on FX supply, dwindling corporate earnings, corporate job losses, etc.

The stock market ended the trading week to Friday May 15 on a negative note as uninspiring performance in heavy weighted counters like Dangote Cement and MTNN dragged the All Share Index southward.

“We expect the market to witness the same sentiment in the next session”, said equity research analysts at FBN Quest.
The domestic bourse had retreated after two consecutive weeks of gains.

Also in their opinion, Cordros research analysts said market 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 trade cautiously and seek trading opportunities in only fundamentally justified stocks”, they added.

Stock nvestors on the Nigerian Bourse had priced-in risks to Nigeria’s economic growth as petro dollar income dwindled.

Naira was seen weakened on the black market to N450/$ as dollar demand increased from foreign investors and importers with payment obligations that accumulated amid hard currency shortages triggered by an oil price crash.

Meanwhile the naira was seen rangebound on the official and over-the-counter spot markets as bidders resisted weakening the currency since the majority of dollar supply is from the Central Bank.

Though, last Friday the price of Brent crude oil rose to $32.50 as new data pointed to a rebound in demand around the world as more countries begin gradual easing of economic lockdown.

In the trading week ended May 15, the NSE All-Share Index and Market Capitalisation both depreciated by 0.72percent to close
at 23,871.33 points and N12.441 trillion respectively.

Summary of price changes shows 32 equities appreciated in price lower than 39 equities in the preceding week. Twenty-eight (28) equities depreciated in price, higher than 22 equities in the preceding week, while 103 equities remained unchanged, higher than 102 equities recorded in the preceding week.

All other indices finished lower with the exception of NSE Main Board, NSE CG, NSE Pension, NSE ASeM, NSE AFR Bank Value, NSE Meri Growth, NSE Consumer Goods and NSE Oil/Gas which appreciated by 1.29percent, 1.52percent, 0.74percent, 0.36percent, 1.65percent, 4.76percent, 2.25percent and 1.56percent respectively.

The market had also ended last week with total turnover of 926.418 million shares worth N9.768 billion executed in 20,910 deals by investors on the floor of the Exchange, in contrast to a total of 1.662 billion shares valued at N18.205 billion that exchanged hands the preceding week in 28,791 deals.

The Financial Services industry (measured by volume) led the activity chart with 676.072 million shares valued at N5.053 billion traded in 10,753 deals; thus contributing 72.98percent and 51.73percent to the total equity turnover volume and value respectively.

The Conglomerates industry followed with 71.117 million shares worth N399.502 million in 445 deals; and the Consumer Goods industry, with a turnover of 48.835 million shares worth N1.569 billion in 3,497 deals.

Trading in the Top Three Equities namely, FBN Holdings Plc, Guaranty Trust Bank and Zenith
Bank Plc. (measured by volume) accounted for 335.075 million shares worth N4.061 billion in
4,885 deals, contributing 36.17percent and 41.58percent to the total equity turnover volume and value respectively.

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