• Friday, March 29, 2024
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On Custom Street, there’s bearish bias in June

Market up 41.39% year-to-date as stocks gain N2.1trn in one week

It is less than seven trading days to the end of June 2021, the bearish bias clouding the month’s trading activities is not cheering to Nigeria’s investors on Custom Street.

After a disappointing May, the month of June has brought forth to investors about 5 percent decline in their equities value, further fueling the market’s movement into the bear region.

Price list of banking stocks as at June 22 shows where long term investors (not speculative buyers) have lost money this year.

They are ETI which decreased by -14.2percent this year, FCMB (-5.4percent), Fidelity Bank (-9.5percent), Jaiz Bank (-9.1percent), Stanbic IBTC (-10.2percent), Sterling Bank (-21.1percent), UBA (-15.6percent), Unity Bank (-9.4percent), Wema Bank (-17.4percent), and Zenith Bank (-4percent).

“Going into July, we remain very cautious on the equities market in the short term, due to a number of factors. From a fundamental perspective, July is earnings reporting month which would span the April to June period where the coronavirus pandemic hit the economy and many businesses hard. Thus, we expect many companies to report significantly weak numbers save for Telecoms, Logistics, Pharmaceuticals and Food focused companies”, according to FSDH Research analysts.

Read Also: Stock market fails to start new week with gain

For the industrial goods sector, CAP is down by 5percent this year, BUA Cement (-9.5percent), and Dangote Cement (-6.1percent). Investors in consumer goods stocks who have exposure in Cadbury have seen their portfolio dip this year by 11.1percent, International Breweries (-9.2percent), Nestle (-7percent), Northern Nigeria Flourmills (-8.8percent), and Unilever (-5percent).

Now that the spate of sell-off in the equities market makes most investors tread cautiously, the record negatives may trickle into July being the half-year earnings reporting month on the Nigerian Exchange Limited (NGX).

Another negative take-off to a new week amid expectations of bargains as stock prices moved to new low strengthens some analysts’ view in favour of further unpredictability.

“After consecutive sessions of positive closes, we foresee investors coming into the market to sell”, Vetiva analysts had said on Monday, adding that they expect a bearish session.

Crude oil prices retreated on Tuesday after Brent rose above $75 a barrel for the first time since April 2019 and as OPEC+ begins discussions on raising oil production, but a strong demand outlook underpinned prices. Bitcoin on Tuesday fell below $30,000 for the first time since January, adding to losses ignited a day earlier when China’s central bank deepened a crackdown on cryptocurrencies. The Central Bank of Nigeria (CBN) recently announced travellers can now access up to $4,000 per trip from commercial banks while they can access up to $5,000 per trip for business trips. Nigeria’s May inflation report show headline inflation declined for the second consecutive month to 17.93percent.

“We look forward to a mixed sentiment market as companies get ready their second-quarter (Q2) financial reports”, said equity research analysts at Lagos-based GTI Securities.

In Oil & Gas sector, stock like MRS has decreased by 8.4percent this year, while Oando is down by -20.5percent year-to-date (YtD). In the Agriculture sector, FTN Cocoa has dipped this year by -54.5percent; while Insurance Sector has seen like of Cornerstone decrease by -13.6percent this year, and AXA Mansard by -14.3percent.

Healthcare: GSK (-12.3percent) and Neimeth (-22.9percent). ICT: Chams (-8.7percent) and Computer Warehouse Group (-54.7percent). Telechoms: Airtel (-20.4percent) and MTNN (-2.9percent). Service: Ikeja Hotel (-24.2percent), Caverton (-11.7percent), and C & I leasing (-8.7percent).

The FSDH research analysts further noted that “From a technical analysis perspective, the ASI remains very close to the overbought region with Relative Strength Index (RSI) at 53.8pecent. This indicates the market in July has more downside potential than upside potential.

“In addition, investors have not been enthusiastic about taking positions in the market, with average activity level in June remaining below 2020 monthly average. Furthermore, investor sentiment was soured by the recent MSCI review that placed Nigeria on a watchlist due to FX illiquidity. Thus, we expect minimal activities from index fund managers, while we expect any resumption of FX sale to foreign portfolio investors (FPIs) could trigger a strong sell-off”.