Investor entry window widens as equities pullback with N10bn weekly loss
By Omobayo Azeez
Amidst a bearish Nigerian equities market, the window to clock into the market is getting wider at the moment following continuous fall in prices of some liquid shares with sound fundamentals.
As investors lost to a tune of N10 billion to close last week, analysts described the development as a two-sided event that on the one hand pared the aggregate market value but on the other has created opportunities for investors to take positions on some fundamentally justified stocks.
Specifically, the market sustained its bearish outlook as the All-Share Index (ASI) shed 18.7 points equivalent to 0.08 per cent loss to close at 24,287.66 basis points while market capitalization closed on the same not negative at N12.670 trillion.
The week also recorded mixed performance in terms of market momentum as traded volume advanced by 12.76 per cent against 44.73 per cent decline witnessed in value.
Investors exchanged a total turnover of 1.016 billion shares worth N7.436 billion in 18,092 deals, in contrast to a total of 901.542 million shares valued at N13.453 billion that exchanged hands the previous week in 18,676 deals.
Losses in Nigerian Breweries Plc at -11.9 per cent and banking stocks dragged down the index, and offset the 5.9 per cent, 1.6 per cent and 1.2 per cent gains in AIRTELAFRI, MTNN and BUACEMENT respectively.
Thus, the Month-to-Date (MtD) and Year-to-Date (YtD) losses printed -0.8 per cent and -9.5 per cent, respectively.
Sectoral performances reflected the market’s negative outcome, with banking losing -3.9 per cent, oil & gas shedding -1.9 per cent, consumer goods closing lower at -1.9 per cent and the insurance index projecting a bearish outlook of -1.9 per cent loss. Only the industrial goods gained 0.5 per cent for the week.
“In our opinion, risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions. Thus, we continue to advise investors to trade cautiously and seek trading opportunities in only fundamentally justified stocks,” said analysts at Cordros Capital Limited.
In the meantime, however, market experts expect a sustained long and short-term money flow into the telecommunication, healthcare and financial services sectors.
They hold that the market has continued to mirror the general economic stance of the country and that the global terrain without unstable out is predominant.
“Already, the half-year earnings performance, the discovery of a Covid 19 vaccine, oil price recovery and effective implementation of government’s intervention policies and 2020 revised budget failed to give the much desired direction,” said analysts at United Capital Plc.
Experts at Investdata Consulting Limited also forecast mixed trend to continue as the earnings season kicked off with United Capital and UHREIT filing their numbers ahead of the June inflation report, and the MPC meeting that has been scheduled to hold on Monday.
They further said that the market is hurting more from inconsistencies in government policies which have continued to dampen investor confidence ahead of the expectedly disappointing half-year corporate earnings reports.
“This is likely to support the wave of decline as pullbacks persist, creating new entering opportunities. Sectors that have suffered oversold, so far, offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment,” said the analysts led by Ambrose Omordion.
For immediate liquidity or cash, the experts advise investors to trade low priced stocks with serious caution to avoid being trapped.
They however noted that the market’s high dividend yield continues to attract buying interests, as few audited and unaudited corporate earnings will hit the market, going forward. “This is despite the likely continuation of selloffs.
“Investors are buying to increase their positions in undervalued stocks ahead of Q2 numbers. It is also against the backdrop of the fact that the capital wave in the financial markets may persist in the midst of relatively low-interest rates in the money market, high inflation, and unstable economic outlook for 2020.”
The week closed with the financial services industry leading the volume activity chart with 784.322 million shares valued at N3.305 billion traded in 10,592 deals; thus contributing 77.23 per cent and 44.45 per cent to the total equity turnover volume and value respectively.
The oil and gas industry followed with 61.822 million shares worth N418.191 million in 984 deals, and the third place was the consumer goods industry, with a turnover of 42.999 million shares worth N1.102 billion in 2,848 deals.
Trading in the top three equities namely, Sterling Bank Plc, FCMB Holdings Plc and FBN Holdings Plc., measured by volume, accounted for 416.989 million shares worth N791.078 million in 2,752 deals, contributing 41.06 per cent and 10.64 per cent to the total equity turnover volume and value respectively.