Despite good outings by most of the companies that have released their half-year results, sell pressures have continued to haunt the equities market, with the loss of N200 billion or 1.4 percent from their values last week.
Market participants had expected that improved half-year (H1) earnings releases by over 30 companies on the Nigerian Stock Exchange (NSE), stable policy environment and increased inflow from foreign buyers would be a boost to the stock market.
The retention of the tight monetary policy stance by the Central Bank of Nigeria (CBN) could not also entice equities buyers as profit-taking activities at the Nigerian bourse persisted, BusinessDay investigations show.
The Monetary Policy Committee (MPC) of the CBN had last week retained the policy rate at 12 percent, which analysts regard as “business as usual” and a cautious start to the journey towards a transition to low interest rate environment.
Contrary to the analysts’ view, however, unchanged policy stance failed to entice equities buyers as the bears reigned supreme last week. The stock market’s performance indicator showed that year-to-date (YtD) returns eroded further to 2.31 percent.
The NSE All Share Index (ASI) which tracks the performance of the stock market dropped from a high of 42,891.82 points to 42,285.82 points at the close of deals, indicating a decline of 606 points or 1.41 percent week-on-week (WoW), and 0.46 percent month-to-date (MtD).
“Notwithstanding upcoming earnings season, we are bearish on equities as we believe the bellwether stocks are fairly valued, with limited upside in the months ahead,” said research analysts at Associated Discount House Limited.
“We think profit-taking by foreign investors will defy bargain hunting tendencies in the earning season, especially as we are conservative on earnings release from banks and large-cap consumer goods names,” they said.
Analysts at Dunn Loren Merrifield Asset Management and Research Company say they expect performance of foreign markets, and the risk appetite of investors, including their political risk perception of Nigeria, to remain a major determinant of equities performance for the rest quarters of the year.
They also expect strong performance from the construction and industrial goods space, “especially from major players”, adding, “This will usher in a positive stock price reaction.”
Iheanyi Nwachukwu
