Going by analysts’ outlook on the stock market since this week, the probability of reducing the negative year-to-date (YtD) return remains slim, as mixed feelings continue to trail the market’s direction.
While many schools of thought within the market say they expect investors profiteering to extend into this week due to speculators strong hold on the market, others say the likely release of impressive scorecards and accompanying rewards, particularly by the banks, will stimulate investors’ buy decisions.
By implication, banks release of scorecards that are not in line with the market’s expectation will trigger another round of sell-off at the equities market. Some analysts are also of the view that the recent price decline in most value stocks offers an opportunity for another round of bargain hunting activities.
Prior to this week, sell pressure bedevilled the stock market, causing the benchmark performance indicates to re-route negatively. For instance, the NSE All-Share Index (ASI) depreciated from week open level of 39,558.89 points to 38,952.47 points, down by 1.53 percent last week. While market capitalisation dropped to N12.512 trillion from a high of N12.707 trillion, losing N195 billion.
Similarly, five of NSE sector indices depreciated during last week with the exception of three that appreciated.
The NSE 30 index dropped by 1.66 percent to close at 1,748.25; NSE Insurance index declined by 2.31 percent to close at 143.28; NSE Consumer Goods dropped by 4.67 percent to close at 960.71; NSE Lotus II dipped by 1.79 percent to close at 2,789.07, and the NSE-ASeM index also depreciated by 0.30 percent to close at 956.72.
Investors buy decision in favour of banking counters helped to peak its index. The NSE Banking index appreciated by 0.26 percent to close at 385.45; the NSE Oil/Gas index rose by 1.37 percent to close at 305.61, while the NSE Industrial Goods index appreciated by 0.52 percent to close at 2,582.16.
According to Morgan Capital analysts, “the effect of the US tapering ensured that Foreign Portfolio Investors (FPI) sold down some of their positions in the market and the anticipated hike in the CRR to 100 percent also contributed to the negative sentiments endured by banking stocks.”
However, these analysts said “the sudden suspension of the CBN governor gave a new lease of life to banking stock, particularly from the retail investors, who saw the beaten down banking stocks as opportunities to re-enter the market.
“The fourth coming general elections still remains a major risk factor. However, going into the new trading week, we expect some moderate rebound as the earnings season continues and investors’ position for the year-end dividend declarations.”
Investors decisions last week to take profit on Nigerian equities impacted their pricing as supply side got boosted. As a result, only 32 equities appreciated in prices lower than 51 equities in the preceding trading week. On the contrary, 54 equities depreciated in prices higher than 26 equities in the preceding week. 112 equities remained unchanged lower than 121 equities in the preceding trading week.
Tony Monye-led team of Access Bank analysts said they expect investor profiteering, which impacted the market last week, to extend into this week “due to speculators’ strong hold on the market.”
In their view about the stock market this week, UBA Capital analysts said all eyes were on banks’ earnings release. They expect that earnings release from Zenith Bank and GTBank should stimulate investor appetite and stabilise stock prices.
“On expectation of Zenith Bank and GTBank earnings release (with attractive dividend), we expect modest recovery in prices. Guinness and Ashaka Cement should recover this week, while we look forward to profit-taking on Cement Company of Northern Nigeria,” the analysts said.
“While rising yield on risk-free, fixed income securities may further douse local investors’ appetite for stocks and foreign fund managers are expected to remain on the sell-side, we expect attractive dividend yields on banking stocks to stimulate modest buying interest, thus informing our outlook of sustained stability in the market,” UBA Capital analysts further said.
Tuesday afternoon, the NSE published Zenith Bank’s full year 2013 results, which are ahead of analysts’ expectations, with full year profit before tax up by 8 percent at N110.6 billion against N102.100 billion in 2012.
In the statement of comprehensive income for the period ended December 31, 2013, Zenith Bank proposes dividend payout of N54.944 billion compared with N50.234 billion paid out in 2012. The proposed dividend payout, which is subject to shareholders’ approval at the bank’s annual general meeting on April 2, 2014, translates to N1.75 kobo per share compared with N1.60 kobo dividend per share it paid in 2012.
Iheanyi Nwachukwu
