Domestic Equities: Bears navigate wheel in first trading week as profit taking halts bulls’ advance

By Charles Abuede

• Losses in Dangote Cement, MTN and Oando dragged market to negative zone last week
• Sentiments expected to remain favourable this week amidst the unattractive yield environment in the fixed income space

In the course of last week, the local bourse took a breather after a stellar run that spanned three weeks and pushed last year’s annual return to the highest in at least a decade. In focus, the Industrial Goods sector weighed on the market chiefly due to selloffs on the sector heavyweight, Dangote Cement, which had gained massively in the run-up to the commencement of its share buy-back programme.

However, market investors and analysts expect market sentiment to remain favourable in the equities market amidst the unattractive fixed income yield environment as profit-taking activities will likely buck the uptrend observed in overvalued stocks.

The domestic equities market opened the first week of the year on a bearish note as the All-Share index was down 0.37 per cent from the previous week to settle at 40,120.22 points. The negative performance was on the back of losses in Dangote Cement (-8.1%), MTN Nigeria (-2.8%) and Oando Plc (-4.1%). Consequently, market capitalisation declined by N78.7 billion to close the week at N21 trillion while the market year to date return stood at -0.37 per cent.

Activity level varied as average volume climbed 32.7 per cent to 678.8 million units while value fell 54.1 per cent to N4.0 billion. The most traded stocks by volume were Transnational Corporation (107.0m units), AIICO Insurance (97.2 million units) and Access Bank (69.3 million units) while Zenith Bank (N1.7 billion), GTBank (N1.3 billion) and Nigerian Breweries (N780 million) led the value chart.

The performance was bullish across sectors as 4 of 6 indicators closed in the green, save the Industrial Goods and AFR-ICT indices which lost 0.6 per cent and 0.5 per cent from the prior week respectively due to losses in Dangote Cement (-8.1%) and MTN Nigeria (-2.8%). Conversely, the oil & gas and Insurance indicators were the best performers, up 13.2 per cent and 9.5 per cent week on week respectively, buoyed by buying interest in Seplat Petroleum (+23.3%) and NEM Insurance (+28.5%). Lastly, the banking and consumer goods indices closed 3.2 per cent and 2.6 per cent higher from the previous week’s close respectively on the back of gains in Zenith Bank (+3.4%), GTBank (+2.0%) and International Breweries (+16.0%).

Investor sentiment as measured by market breadth (advance/decline ratio) strengthened to 2.2x from 0.9x recorded last week as 47 tickers gained against 21 losers. BOCGAS (+32.2%), NEM Insurance (+28.5%) and Seplat Petroleum (+23.3%) led the top gainers while DEAP Capital (-12.0%), Royal Exchange (-11.5%) and Dangote Cement (-8.1%) led the decliners.