Speculative buyers at the Nigeria stock market will not be in for good bets this week amid scarcity positive catalysts capable of spurring ‘Buy’ decisions.
The odds are still in favour of the bears due to a combination of increasing cases of Covid-19 and fluctuating oil price which dampen foreign investors appetite for Nigerian stocks.
Though, for long term investors, the current state of the stock market offers attractive entry for bargains as most value counters trade at their record lows.
“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 Lagos-based Cordros Capital.
The domestic bourse last week witnessed sell pressure as investors’ confidence continued to dampen in the face of global uncertainties and domestic macro-economic challenges.
Nigeria’s listed stocks lost about N257billion in the trading week ended Friday July 3 as investors approached the market with caution.
“We expect the market to trade in a similar pattern in the coming session,” said equity research analysts at FBNQuest in their July 3 note to investors.
Week-on-week (wow), the market closed lower by -1.98 percent after Friday’s 0.16percent dip. In just three days into July, Nigerian equities have already declined by 0.58 percent pushing the year-to-date (YtD) negative return further by -9.34 percent.
“In the absence of positive catalysts capable of spurring ‘Buy’ decisions, we expect the market to continue on its downward trend despite the attractiveness of a number of fundamentally sound stocks”, said equity research analysts at Vetiva Securities.
Oil, major source of Nigeria’s dollar revenue fell below $43 a barrel on Friday as a resurgence of coronavirus cases raised concern that fuel demand growth could stall, although crude was still headed for a weekly gain on lower supply and wider signs of economic recovery.
Brent crude was down 56 cents, or 1.3percent, at $42.58 a barrel by 1352 GMT, and U.S. West Texas Intermediate (WTI) crude fell 58 cents, or 1.4percent, to $40.07.
In the review trading week, all NSE Sectoral Indexes closed in the red, led by NSE Banking (-7.52percent) and NSE Industrial Goods Index (-6.43percent).
Domestic equities market remains pressured as the fear of the second wave of the Covid-19 takes a toll on investors’ confidence. This is in addition to declining Foreign Portfolio (FP) inflow which puts pressure on Naira against the dollar at the FX markets.
The value of listed stocks decreased from to N12.695trillion from week-open high of N12.952 trillion; while the Nigerian Stock Exchange (NSE) All Share Index (ASI) decreased from 24,829.02 points to 24,336.12 points.
Interestingly, the recent decline in share prices at the Nigerian Stock Exchange created opportunities for bargain investors who are willing to take long term position. This implies that the record negative trend would be reversed on account of bargain hunting by investors.
Preparatory to the release of their half-year (H1) results, companies have started issuing notification of closed period. GTBank for instance said the closed period for trading in its shares commenced on July 3. The bank’s board will meet on July 22 to consider the audited financial statement for the half-year ended June 30, 2020.
Though many companies first-quarter (Q1) results were not totally negative, but were obviously affected by the Covid-19 pandemic and the lockdown across states. Their second-quarter (Q2) results are expected to more precisely reflect the impact of the Pandemic-driven decline in economic activity.
