Bears strengthen hold on equities as index slumps further

The challenged nation’s economy has continued to reflect on the equity sector of the Nigerian Stock Exchange (NSE) as the All-Share Index and market capitalisation extended its losing streak in all the five consecutive trading sessions last week.

Shedding 0.003 per cent transactions to close the week at 27,918.59 points and N13.61 trillion in market capitalization, all other indices finished higher with the exception of NSE-Main Board, NSE Banking, NSE Pension, NSE Insurance, NSE AFR Div Yield and NSE Oil/Gas indices which depreciated by 0.28 per cent, 0.39 per cent 0.18 per cent, 0.94 per cent 1.13 per cent and 0.19 per cent.

The prevailing stagnation, may however be attributable to the prolonged confidence crisis that has been deepened by political risk, as well as slow economic activities that have bedeviled the country in the past few years.

Analysts believed that the extended bear market even after the release of the much awaited ministerial list is as a result of the widespread dissatisfaction over the calibre of the nominees, restoration of Value Added Tax (VAT) charges that has heightened transaction costs in the market.

The ugly trend has triggered continued volatility and selloffs on the exchange, given that the stock market cannot be dissociated from the systemic problems in the nation’s politico-economic environment.

For instancec weak scorecards emanating from listed companies extended the bearish sentiments, as the first quarter (Q1) and second quarter (Q2) numbers released so far were weak and below market expectations.

Reacting to the market outlook, the Chief Research Officer of Investdata Consulting Limited, Ambrose Omodion, said the current bearish trend is expected to continue as listed firms churn out half-year numbers that remain below market expectation to change the prolonged downturn.

“Discerning investors should target value stocks considering the current low valuation to position for dividend income and capital gain,” he said.

Analysts at Afrinvest Research Limited said: “We believe that the bearish run would persist as investors maintain a risk-off approach towards investing in the domestic equities market.

“However, we expect that investors would resume bargain hunting due to sharp losses in some stocks recently, especially those with positive H1:2019 earnings.”

Further breakdown of last week’s transactions showed that a turnover of 1.069 billion shares worth N11.393 billion were recorded in 16,346 deals by investors on the floor of the exchange in contrast to a total of 1.086 billion shares valued at N13.390 billion that was exchanged in 15,774 deals on July 29, 2019.

The financial services industry (measured by volume) led the activity chart with 606.437 million shares valued at N5.381 billion traded in 7,529 deals; thus contributing 56.75 per cent to the total equity turnover volume.

The ICT industry followed with 225.576 million shares worth N1.776 billion in 751 deals.

The conglomerates industry ranked third with a turnover of 66.375 million shares worth N85.924 million in 890 deals.

Trading in the top three equities namely, Courteville Business Solutions Plc, United Bank for Africa Plc and FCMB Group Plc (measured by volume) accounted for 402.694 million shares worth N819.828 million in 1,526 deals, contributing 37.68 per cent to the total equity turnover volume.