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Market confidence positive as analysts see rising liquidity

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Sentiments on the Nigerian equities remained positive as investors continued to chase the inflation adjusted earnings in the face of declining fixed income yields. Although some profit taking activity impacted gains last week, but the All-Share Index (ASI) still increased marginally by 0.7 percent to 29,618.52 points.

All other indices finished lower with the exception of NSE 30, NSE CG, NSE Premium, NSE Banking, NSE AFRI Bank Value, NSE MERI Value and NSE Oil/Gas index, which appreciated by 0.66 percent 0.64 percent, 3.85 percent, 2.30 percent, 2.67 percent, 1.74 percent and 0.57 percent respectively, while NSE ASeM Index closed flat.

A breakdown of market activity last week, showed that investors booked profit in the newly listed Bua Cement and Nigeria Breweries.However, interest in the market’s heavyweights- MTN Nigeria, following the positive news surrounding the $2billion tax claim by the Federal Government, as well as DANGCEM, kept the index in positive territory for the week.

Analysts, at the weekend, expressed optimism that since liquidity remains one of the major fundamentals that drive prices in equities market, the further crash of Treasury Bill rate across all maturities remains positive for the market.

Specifically, the Chief Research officer of Investdata Conshlting Limited, Ambrose Omodion, specifically pointed: “Especially with the lowest bid rate for 364-day at four percent and 91 and 182-day instruments stop rate of 2.95 percent and 3.95 percent, respectively.

“The decline in rates resulted from oversubscription due to the excess liquidity in the financial market, after more Open Market Operations investments matured on Wednesday and the funds could not be rolled over due to restrictions placed by the Central Bank of Nigeria.

“We expect mixed performance and profit-taking to persist, just as position-taking on pullbacks as investors position for full-year earnings reports of companies. This is also against the backdrop of the prevailing low-interest rate regime in the money market.”We see Investors focusing on the upcoming full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.

“Again, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound,.” he said. Also, analysts at Codros said: “Looking ahead, while we expect profit-taking to continue in the coming week, we still see significant legroom for a further rally, as the elevated maturities from fixed income instruments hunt for investment vehicles.

“Nonetheless, we advise investors to cherry-pick fundamentally sound stocks.”Further analysis of last week’s trading, indicated that a turnover of 2.087 billion shares worth N26.470 billion was recorded in 24,262 deals, in contrast to a total of 2.683 billion shares valued at N32.646 billion that changed hand in 30,956 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 1.117 billion shares valued at N13.693 billion traded in 13,739 deals; thus contributing 53.51 per cent to the total equity turnover volume.

The healthcare industry followed with 521.893 million shares worth N182.965 million in 420 deals.The third place was conglomerates industry, with a turnover of 123.606 million shares worth N573.907 million in 1,164 deals. Trading in the top three equities, namely, Union Diagnostic & Clinical Services Plc, Access Bank Plc and Zenith Bank Plc. (measured by volume) accounted for 877.992 million shares worth N8.399 billion in 5,251 deals, contributing 42.06 percent. to the total equity turnover volume.

A total of 8,871 units valued at N36.909 million were traded this week in 20 deals, compared with a total of 15,390 units valued at N13.095 million transacted last week in 32 deals. A total of 53,219 units of Federal Government Bonds valued at N58.147 million were traded this week in 16 deals, compared with a total of 64,840 units valued at N71.362 million transacted last week in 30 deals.


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