Weak sentiment trails Nigeria stocks

Unless more investors decide to shift from their cautious approaches to buying stocks at the Nigerian Bourse, the equity market will still wrap-up this month on a negative note.

The chances that stock market will close in the green zone this month becomes slimmer now that the earnings season which hitherto enticed stock buyers has now entered its final week.

As at the beginning of this final trading week in the month of March, the stock market month-to-date (MtD) return was -2.15 percent (Tuesday March 26). Also as at Tuesday the market yielded -1.25 percent returns year-to-date (ytd).

At the end of its 2-day policy meeting held this week, in a vote of 6 to 5 members, the Monetary Policy Committee (MPC) voted to cut the monetary policy rate (MPR) by 50 basis points (bps) to 13.5percent. The Committee also decided to: maintain the asymmetric corridor around the MPR at +200/-500bps; hold Cash Reserves Ratio (CRR) at 22.5percent; and keep liquidity ratio at 30percent.

After recording four negative sessions, the Nigerian Stock Exchange (NSE) All Share Index (ASI) gained 82basis points (bps) on the last trading day of last week (Friday March 22), erasing last week’s losses to a mere 1basis point (bp).

Despite that the stock market advanced by 0.82percent at the close of trading on Friday March 22, a lingered six (6) days of bear run on Custom Street became a major drag on the performance of the domestic equities market.

Analysts are cautiously optimistic

“Despite the positive close on Friday, we highlight that the sentiment in the market still remains weak. On the back of this, we expect seesaw trading this week, as the interplay between bargain hunting and sell-offs continues”, Vetiva research analysts said March 25 note to investors.

Also in their views, Afrinvest Research analysts expect bargain hunting activities seen on the last day of trading (March 22), largely supported by improving investor sentiment to extend to early trades in subsequent sessions, adding that “This could potentially drive positive returns for the week in the domestic bourse”.

The Afrinvest analysts’ expectation has not manifested as the market kicked off the week on a negative note.

In its March 22 note to investors, FBN Quest research analysts expect the market to find support at current levels this week.

“In the absence of a positive catalyst, we guide investors to trade cautiously in the short term. However, stable macroeconomic fundamentals and compelling valuation remain supportive of recovery in the mid-to-long term”, said CordrosResearch analysts in their March 22 note.

“We expect two major factors to guide investors’ sentiment; mispricing in the market in the wake of the bearish trend seen post-election, and earnings results-being the final week for companies to file their earnings with the Nigerian Stock Exchange”, according to United Capital research analysts.

Market review

Week-on-week (wow), the Nigerian Stock Exchange (NSE) All-Share Index (ASI) and Market Capitalisation depreciated by 0.01percent to close the week ended March 22 at 31,139.35 points and N11.612trillion respectively.

Summary of share price changes

The summary of price changes showed 32 equities appreciated in price during the review week, higher than 18 in the preceding week. Thirty-eight (38) equities depreciated in price, lower than 45 equities recorded in the preceding week, while 98 equities remained unchanged lower than 105 equities recorded in the preceding week.

Turnover, major drivers and top trades 

The market recorded total turnover of 1.198 billion shares worth N12.273 billion in 18,293 deals in contrast to a total of 1.113 billion shares valued at N13.465 billion that exchanged hands the preceding week in 15,036 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.014 billion shares valued at N9.693 billion traded in 12,165 deals; thus contributing 84.63percent and 78.98percent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 58.049million shares worth N1.398 billion in 2,689 deals. The third place was Conglomerates Industry with a turnover of 46.272 million shares worth N103.316 million in 626 deals.

Trading in top three equities namely, Access Bank Plc, Zenith Bank Plc and United Bank for Africa Plc (measured by volume) accounted for 651.600 million shares worth N6.294 billion in 6,505 deals, contributing 54.39percent and 51.28percent to the total equity turnover volume and value respectively.

All other indices finished lower with the exception of the NSE CG, NSE Premium, NSE ASeM, NSE Banking, NSE-AFR Bank Value, NSE AFR Div Yield, NSE Industrial Goods and NSE Pension indices which appreciated by 0.66percent, 0.27percent, 0.55percent, 3.82percent, 4.76percent, 2.97percent, 2.42percent and 0.71percent respectively.

 

Iheanyi Nwachukwu