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The Nigerian stock market has witnessed increased activity following investors continued reaction to improved earnings releases.
With most of the first-quarter (Q1) earnings announcements coming in better-than-expected, coupled with related optimism in the growth of Nigerian economy, most analysts expect the Nigerian Stock Exchange (NSE) All Share Index (ASI) to trade further in the green –though not without pockets of profit-taking.
In a boost for investors in Nigerian equities, the central bank last week allowed portfolio investors to trade the naira currency at a market-determined exchange rate and increased dollar sales on the interbank market. Early this week, Nigeria’s oil production reached a new high of 2 million barrels per day.
After a record N197billion gain last week which rapped up April trading activities, the Nigerian stock market opened this month with 0.80 percent increase with attendant positive impact on the year-to-date (ytd) returns –thereby hitting a three-month high.
The market was lifted by company earnings results that outperformed market expectations and hopes that a new currency-trading window will help lure investors back to Africa’s biggest economy.
While the recent opening of the Investment and Export window (OTC market) portends a potential sell down for shares as Foreign Portfolio Investors (FPIs) seek to exit, research analysts at Investment One believe the long-run upside potential outlook of the economy would moderate the overall effect of this sell-down.
“There was bullish resurgence at the Nigerian equities market due to the torrents of impressive first-quarter (Q1) earnings released by banks and some bellwether stocks”, research analysts at Lagos-based SCM Capital said.
“Trend forecasting oscillators are currently bullish on NSE and have had this outlook for the last four periods. On the market outlook, we expect to witness more rally in the market as more companies release their first quarter results. As a result, these positive sentiments may likely be sustained as confidence begins to build up in the market. We however do not rule out the possibility of profit-taking,” SCM Capital analysts added.
While Vetiva Capital analysts noted corporate results were better than expected and anticipate increased demand for Nigerian stocks this week, research analysts at Lagos-based Investment One said they believe the recently approved new Pension Fund Administrator (PFA) investment guideline, which stipulates minimum of 10-15percent for equities investment should serve to boost both turnover and price momentum.
Investment One research analysts estimate this could see potential inflows of about N600billion in PFAs investment into the equities space as part of portfolio rebalancing exercise.
They noted this in their recent report titled, “Outlook for the Nigerian investment space given recent positive developments”.
“We also believe the threat of MSCI index exit of Nigerian equities is now moderate given the new Investment & Export window. Current PMI readings suggest potential for improvement in real sector operating climate as such we may see recovery in earnings performance. We however reiterate our preference for quality names given their dominant position in their respective sector”, Investment One researchers said.
Iheanyi Nwachukwu
