Bears regain vigour as analysts see difficult future

Bears regained dominance on the equity sector of the Nigerian Stock Exchange (NSE) last week, as marginal gains recorded in the last three trading days could not sustain the previous week’s uptrend.

Consequently, the All-Share Index (ASI) and market capitalisation depreciated by 0.13 per cent to close the week at 38,866.39 and N20.335 trillion respectively.

All other indices finished lower except NSE Premium, NSE MERI Growth, NSE Consumer Goods, NSE Lotus II and NSE Growth Index which appreciated by 0.62 per cent, 0.28 per cent, 1.12 per cent, 1.11 per cent and 0.62 per cent while the NSE ASeM Index closed flat.

Analysts noted that the profit-taking and rising yields in the fixed income market coincided to pull the index and trigger sectoral rotation. This is despite the 2020 full-year earnings with dividend payout churned out by listed firms.

However, they argued that expectations of higher rates at the coming T-bills auction may trigger further sell-offs in the bourse this week.

For instance, the Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion said: “The mixed trend is expected to continue, even as market outlook remains mixed and dicey due to rising inflation, mismatch in policies and mixed sentiments, with uptick yields in the fixed income market.

He noted that the current downtrend offers traders opportunities to position for the short-term, while investors should target blue-chips and dividend-paying stocks to position for capital appreciation and dividend payout now.

Analysts at Codros Capital said: “Taking a cue from the trading pattern that ensued this week (last week), we expect market activities to be quiet in the short term as investors keep their gaze on yields direction in the fixed income market.

“Considering that the FY 2020 earnings season is gradually coming to a halt, we now expect investors’ sentiment to be influenced by developments in the macroeconomic landscape and corporate actions.” “Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”

A review of transactions last week showed that following losses by most blue-chip stocks, the NSE sustained a sliding profile at the opening of the week yesterday, leading to a fall in market capitalisation by N78 billion.

At the reopening of trading on Tuesday, the ASI declined by 150.13 absolute points, representing a decrease of 0.39 per cent to close at 38,766.61 points while the overall market capitalisation value lost N78 billion to close at N20.283 trillion.

The market loss was driven by price depreciation in large and medium capitalised stocks amongst which are Guinness Nigeria, MRS Oil Nigeria, Guaranty Trust Bank, BUA Cement and Aluminium Extrusion Industries.

Investors renewed appetite in the shares of highly-capitalised (highcap) companies halted four days’ bearish run, causing the All-Share Index (ASI) to appreciate by 0.02 per cent on Wednesday.

Consequently, the ASI grew by 7.42 absolute points, representing an increase of 0.02 per cent to close at 38,774.03 points. Also, the overall market capitalisation value gained N4 billion to close at N20.287 trillion.

The gain was propelled by price appreciation in large and medium capitalised stocks such as Nestle Nigeria, Flour Mills of Nigeria, MTNN, Stanbic IBTC Holdings and Africa Prudential.

However, the market breadth closed negative as 27 stocks lost relative to 14 gainers. Trading on the NSE continued in an upward note on Thursday, as more blue-chip stocks appreciated, resulting in a further rise in market capitalisation by N13 billion.

At the close of transactions, the ASI grew by 25.8 absolute points, representing an increase of 0.07 per cent to close at 38,799.83 points. Also, the market capitalisation value gained N13 billion to close at N20.3 trillion.

The upturn was driven by price appreciation in large and medium capitalised stocks amongst which are; Okomu Oil, Zenith Bank, Guaranty Trust Bank, Oando and Access Bank.

On the activity chart, a turnover of 887.037 million shares worth N9.193 billion was recorded in 17,837 deals by investors on the floor of the exchange, in contrast to a total of 1.445 billion shares valued at N19.039 billion that changed hands in 17,400 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 607.224 million shares valued at N6.066 billion traded in 10,125 deals; thus contributing 68.46 per cent to the total equity turnover volume.

The conglomerate industry followed with 112.318 million shares worth N572.831 million in 1,450 deals. The third place was Oil and Gas Industry, with a turnover of 57.662 million shares worth N201.453 million in 1,107 deals.

Trading in the top three equities namely Zenith Bank Plc, Access Bank Plc and Guaranty Trust Bank Plc (measured by volume) accounted for 259.248 million shares worth N4.818 billion in 4,970 deals, contributing 29.23 per cent to the total equity turnover volume.

A total of 361,254 units of ETPs, valued at N1.909 billion were traded last week, in 29 deals compared with a total of 108,271 units valued at N445.285 million transacted in 16 deals during the preceding week.

Also, 44,303 units of bonds, valued at N55.333 million were traded in 13 deals last week, compared to a total of 50,358 units valued at N55.298 million transacted in 14 deals during the preceding week.