When Nigerian equities dealers assemble for trading on Wednesday May 27 after the public holidays to mark the Eid-al Fitr celebration, most of them may continue to take advantage of some cheap counters.
On the contrary, the short-term speculative buyers among them may resort to taking profit on some other tickers that have gained substantially in recent times.
Over N694billion gain was booked in the trading week ended May 22 as the market maintained its bullish run all through the review week.
The All Share Index (ASI) closed the last trading session of the review week higher by 1.80percent to 25,204.75 points, from week-open position of 23,871.33 points. From week-open low of 12.441trillion, the value of listed stocks increased to N13.135trillion.
Taking a cue from the improving events in the global space as well as the positive market breadth posted on the last trading session of last week, market watchers at Vetiva Securities expect the market to continue on its upward trend, “though at a slower rate upon resumption from the holiday”.
Fifty-five (55) equities had appreciated in price last week, higher than 32 equities in
the preceding week. Eight (8) equities depreciated in price, lower than 28 equities in
the preceding week, while 100 equities remained unchanged, lower than 103 equities recorded in the preceding week.
“The question on the mind of investors includes whether the uptrend is sustainable and what exactly is driving this recovery”, said Lagos-based research analysts at United Capital plc in their recent note.
In the analysts opinion, the recovery in share prices of listed stocks on the Nigerian Stock Exchange “is driven by: Rebalancing in the oil market which has resulted in a 94percent rebound in oil prices from $18/barrel to about $35/barrel within a month; increasing indications that governments around the world will reopen their economies regardless of the anxiety around Covid-19; cheap market valuation of high quality stocks; sustained dividend declaration by corporates – translating into attractive dividend yield amid poor rates on T-bills; and sizable market liquidity”.
Coronavirus (Covid-19) pandemic successfully nullified a decade of global oil demand growth and the recovery remains slow lately.
Many foreign and domestic stock investors have continued to price-in this risk amid others considering their near term impact on the Nigerian economy and businesses.
In the latest report from the National Bureau of Statistics (NBS), the overall consumer price index – a measure of the average change in prices over time of goods and services purchased by consumers – was up 12.34percent year on year (y/y) in April 2020
from 12.26 percent y/y in March 2020.
The International Monetary Fund (IMF) predicted a negative Gross Domestic Product (GDP) of -3.4 percent for Nigeria in 2020, due to the ongoing disruptions caused by the Covid-19 pandemic.
“In our opinion, 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”, said equity research analysts at Cordros Capital.
Oil prices have plummeted more than 40percent so far in 2020. The recent rebound was due in part to efforts by the Organisation of the Petroleum Exporting Countries (OPEC) and allies to reduce supply. OPEC+ is reducing supply by a record 9.7 million barrels per day from May 1.
Oil prices tumbled on Friday on rising U.S.-China tensions and doubts about how quickly fuel demand would recover from the coronavirus crisis.
While Brent crude futures fell 93 cents, or 2.6percent, to settle at $35.13 a barrel. U.S. West Texas Intermediate (WTI) crude ended 67 cents, or 2percent, lower at $33.25 a barrel.