Profit taking depresses ASI further by 0.76% ahead of Easter holiday

Analysts optimistic of market rebound on improved earnings
Contrary to the significant buying activities witnessed in the previous weeks, the local market was largely dominated by the bears during the week, occasion by profit taking action in major highly capitalised stocks ahead of the Easter holiday.

The market opened for four trading days last week as the Federal Government declared April 2 (Good Friday) public holidays to commemorate the 2021 Easter celebrations.

The influx of 2020 full-year numbers were not enough to impact the market positively as MTNN price depreciation and profit booking in banking stocks dragged the All Share index down.

Consequently, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) and market capitalisation depreciated by 0.76 per cent to close the week at 38,916.74 and N20.361 trillion respectively.

All other indices finished lower with the exception of NSE Mainboard, NSE Pension, NSE Insurance, NSE AFR Div Yield, NSE MERI Value and NSE Consumer Goods Index, which appreciated by 0.06 per cent, 0.78 per cent, 2.82 per cent, 2.64 per cent, 1.82 per cent and 1.93 while the NSE ASeM Index closed flat.

However, analysts said despite mixed and bearish outlook of the market, some sectors have continued to show improved performance, judging from their recent numbers, as revealed by the strength of supply and demand.

They expressed optimism that the downtrend may not linger with the expected reaction to dividend news and corporate actions of companies that released their 2020 scorecards.

According to them, the earnings news and dividend payout by companies will trigger buying interests as investors rebalance their portfolios for the second quarter, whilst keeping an eye on the movement of yields in the FI market.

Analysts at Codros Capital, said: “Heading into the second quarter, we expect investors to rebalance their portfolios based on an assessment of corporate earnings released during Q1-21 whilst keeping an eye on the movement of yields in the FI market.

“Considering that the FY 2020 earnings season has run its course, 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.”

Investdata Consulting Limited, said: “The prevailing trend after a correction is normal, as the full-year earnings season winds down, ushering in the 2021 Q1 reporting season, even as the changing momentum in the face of mixed trend indicates the in and out movement of funds from the market as revealed by money the flow index.

“In the current market situation, investors should go for those hot sectors with strong potential to grow sales in the current financial year as events in the economy unfold.

“With the expected reaction to dividend news and corporate actions of these companies, the new downward trend signals may not linger, these earnings news and payout by companies will trigger buying interests.”

A breakdown of last week’s trading indicated that investors appetite in some highly capitalised stocks lifted transactions on the NSE on Monday, causing market capitalisation to appreciate by N145 billion.

The ASI rose by 277.17 points, representing an increase of 0.71 per cent to close at 39,493.37 points.

Accordingly, investors gained N145 billion in value as market capitalisation went up to N20.663 trillion.

The upturn was impacted by gains recorded in medium and large capitalised stocks, amongst which are; MTNN, Guaranty Trust Bank, Guinness Nigeria, Custodian Investment and Ecobank Transnational Incorporated (ETI).

Transactions on the floor of NSE reversed gains to close on a downward note on Tuesday, as market capitalisation depreciated by N119 billion.

Precisely, market capitalisation of listed equities declined by 0.57 per cent to close at N20.544 trillion from N20.663 trillion recorded the previous day. The ASI also plunged by 226.26 basis points to 39267.11 points from 39493.37 points.

Investors traded 336.125 million shares valued at N3.268 billion in 4394 deals against 522.174 million shares cost N10.650 billion 4566 deals.

Trading activities on the Nigerian equities market sustained previous day’s negative sentiment on Wednesday, as the ASI depreciated by 0.57 per cent, amidst profit taking on banking and industrial sectors.

The downturn was propelled by investors’ portfolio readjustment ahead of first quarter (Q1), 2021 earnings’ results.

The ASI declined by 221.98 absolute points, representing a decrease of 0.57 per cent to close at 39,045.13 points while the overall market capitalisation value lost N116 billion to close at N20.429 trillion.

The market loss was driven by price depreciation in large and medium capitalised stocks amongst which are; MTN Nigeria Communications (MTNN), Stanbic IBTC Holdings, Glaxo Smithkline Consumer Nigeria, Access Bank and Guaranty Trust Bank.

Amid profit taking ahead of the Easter holiday, trading on the equities sector of the NSE sustained sliding profile on Thursady, as more blue-chip stocks depreciated in price, causing the ASI to slump further by 0.33 per cent.

The ASI dropped by 128.39 absolute points, representing a drop of 0.33 per cent to close at 38,916.74 points. The market capitalisation lost N68 billion to close at N20.361 trillion.

The downturn was driven by price depreciation in large and medium capitalised stocks amongst which are; Lafarge Africa, Zenith Bank, Stanbic IBTC, Guaranty Trust Bank and NEM Insurance.

Further analysis of last weeks trading showed that financial serviceindustry (measured by volume) led the activity chart with 1.033 billion shares valued at N13.369 billion traded in 9,179 deals; thus contributing 71.51 per cent to the total equity turnover volume.

The conglomerates industry followed with 131.153 million shares worth N578.393 million in 811 deals. The third place was consumer goods industry, with a turnover of 92.937 million shares worth N1.750 billion in 2,892 deals.

Trading in the top three equities namely Guaranty Trust Bank Plc, Union Bank Nig. Plc and Wema Bank Plc (measured by volume) accounted for 670.354 million shares worth N10.331 billion in 1,990 deals, contributing 46.39 per cent to the total equity turnover volume and value respectively.

A total of 108,271 units valued at N445.285 million were traded in 16 deals compared with a total of 25,905 units valued at N208.954 million transacted in seven deals during the preceding week

Also, 50,358 units valued at N55.298 million were traded in 14 deals last week, compared with a total of 93,124 units valued at N97.453 million transacted in 47 deals during the preceding week.

42 equities appreciated in price during the week, lower than 48 equities in the previous week. 22 equities depreciated in price, higher than 18 equities in the previous week, while 98 equities remained unchanged, higher than 96 equities recorded in the previous week.