The bears will not easily relinquish their positions this week on the Nigeria Bourse as risks to sustained rally persist.
The continued spread of the Coronavirus and its negative impact on major global and domestic indicators remain a source of worry to investors and businesses.
As a result, stock buyers are advised to trade cautiously in this new week as market watchers foresee a more pressured Bourse in the meantime, despite the attractiveness of a number of fundamentally sound stocks hence.
“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,” said research analysts at Cordros Capital.
“We continue to advise investors to trade cautiously and seek trading opportunities in only fundamentally justified stocks”, the analysts said.
Nigeria’s stock market decreased by 0.12 percent in the trading week ended Friday July 10 as the local Bourse saw a mix of bargain hunting and profit taking activities.
Stock investors booked about N16billion loss in one week. The stock market’s negative return year-to-date (YtD) stood lower at-9.45 percent at the close of the week’s trading session.
The Nigerian Stock Exchange (NSE) All Share Index (ASI) and Market Capitalisation depreciated to close the trading review week at 24,306.36 points and N12.679trillion respectively as against preceding trading week when both indicators closed at 24,336.12 points and N12.695 trillion.
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.
Going into July, analysts remain very cautious on the equities market in the short term, due to a number of factors.
“From a fundamental perspective, July is an 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, FSDH Research said in their July 2 note.
“The performance of equity markets across the world was a tale of two quarters in H1-2020. This was as the outbreak of the COVID-19 pandemic in first-quarter (Q1) 2020 spurred a broad-based risk-off sentiment while the synchronised injections of fiscal and monetary stimulus spurred a risk-on sentiment later in second-quarter (Q2) 2020”, said United Capital research analysts in their July 10 note.
The analysts noted that despite the recovery in Q2-2020, major equity indices in the global, emerging and frontier markets remain below the water, “still wheezing from the negative impact of COVID-19-induced selloffs. Notably, all the six bourses under our coverage in Sub-Saharan Africa (SSA) ended first-half (H1) 2020 in the negative territories.”
