Rising yields in money market dampen appetite for stocks
The upward retracement in yields in the fixed income market has continued to dampen investors’ interest inequities as the bearish performance in the Nigerian Stock Exchange (NSE) extended to a third consecutive week.
Consequently, the NSE All-Share Index (ASI) and market capitalisation depreciated by 0.63 per cent to close last week at 40,186.70 and N21.026 trillion respectively.
Similarly, all other indices finished lower except NSE Banking, NSE AFR Div Yield, NSE MERI Value, NSE Oil/Gas and NSE Growth Indices, which rose by 0.54 per cent, 1.20 per cent, 0.27 per cent, 4.60 per cent and 5.43 per cent respectively just as the NSE ASeM and NSE Sovereign Bond Indices closed flat.
Analysts argued that the bond auction results, wherein stop rates rose by an average of 254 basis points to 11.1 per cent (from 8.56 per cent at the last auction) intensified the downbeat mood in the stock market.
Concern on the rising insecurity in the country also seems to have overwhelmed the lure of increasing dividend yields from investors.
The Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, said: “While chart watchers and market participants await a trigger to drive the anticipated reversal of trend, these pullbacks are creating buy opportunities ahead of earnings expectation.
“However, let your investment plans and objectives: entry and exit strategies, guide you to survive and profit from the expected new trend.
In that way, should the full-year earnings reports and dividend news fail to impact and reverse the current trend, a big rotation in sector trends should also guide you, going into the future.”
Codros Capital said: “We expect the deluge of corporate earnings accompanied by dividend declarations to temper bearish sentiments in the week ahead.
“However, we do not rule out the possibility of continued profit-taking activities due to growing concerns about yield elevation in the FI market. As a result, we think the local bourse will likely exhibit a zig-zag pattern. Notwithstanding, we advise investors to take positions in only in blue-chips as the unimpressive macro story remains a significant headwind for corporate earnings.”
A review of market performance last week indicated the NSE reopened in an upbeat on Monday, following gains recorded by most blue-chip stocks, as ASI increased by 0.33 per cent.
At the close of trading on Monday, the ASI increased by 131.82 absolute points, representing a rise of 0.33 per cent to close at 40,571.67 points while the overall market capitalisation gained N69 billion to close at N21.225 trillion.
The market gain was driven by price appreciation in large and medium capitalised stocks amongst which are; Seplat Petroleum Development Company (SEPLAT), Japaul Gold and Ventures, Mutual Benefits Assurance, AIICO Insurance and Multiverse Mining and Exploration.
Transactions on the NSE closed on a downturn on Tuesday. This followed gains in most highly-capitalised stocks, causing market capitalisation to dip by N41 billion.
The ASI dropped by 77.32 absolute points, representing a drop of 0.19 per cent to close at 40,494.35 points while market capitalisation depreciated by N41 billion to close at N21.184 trillion.
The market loss was driven by price depreciation in large and medium capitalised stocks amongst, including Cornerstone Insurance Plc, UPDC Real Estate Investment Trust Plc, Consolidated Hallmark Insurance Plc, Prestige Assurance Plc and Wapic Insurance Plc.
The bears sustained dominance on the NSE on Wednesday, as more blue-chip stocks depreciated, resulting in a further decline in the ASI by 0.07 per cent.
The ASI fell by 29.03 points or 0.07 per cent to 40,465.32 points. Accordingly, investors lost N15 billion in value as market capitalisation declined to N21.169 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks amongst which are; Beta Glass, Japaul Gold and Ventures, Fidson Healthcare, Consolidated Hallmark Insurance and Vitafoam Nigeria.
The dominance of the bears has continued unabated on the equity sector of the NSE on Thursday, even as more blue-chip stocks join the league of losers, resulting in a further slide in market capitalisation by N132billion. At the close of transactions, 30 stocks depreciated while 10 others constituted the gainers’ chart.
Consequently, the ASI shed 253.13 absolute points, representing a loss of 0.63 per cent to close at 40,212.19 points, resulting to Year-to-Date loss of 0.15 per cent while the overall market capitalisation value lost N132 billion to close at N21.037 trillion.
The downturn was buoyed by value depreciation in large and medium capitalised stocks amongst which are; University Press, Chams, UPDC Real Estate Investment Trust, Multiverse Mining and Exploration and Japaul Gold and Ventures.
Last week, a turnover of 1.541 billion shares worth N18.235 billion was recorded in 22,752 deals by investors on the floor of the exchange.
This volume of shares traded was, however, lower than a total of 2.683 billion shares valued at N23.662 billion that changed hands in 27,844 deals during the preceding week.
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