Expectation of impressive half-year (H1) scorecards; investors recent decision in favour of value stocks that are trading below market value, and expectation of improved liquidity flow from foreign portfolio investors into the equities market, are among key factors now making market analysts to foresee a boost in Nigeria’s equities this period.
As earnings season triggers further uptrend, investors have recently raised their bets in favour of equities – a situation that will help to further climax the returns at the bourse.
Considering this scenario, which plays up at Customs Street, analysts are positive that even when the risks weigh, the market will continue to trend positive this week and beyond.
For instance, stock market analysts at Access Bank plc note that investors have of recent scrambled for stocks with intrinsic value ahead of expected second-quarter (Q2) results, saying “the market may likely remain bullish on excitement over expected Q2 results of bellwether stocks in consumer goods and banking companies.”
In their view, market analysts at Partnership Investment Company plc say that as anticipated, the market surged as investors’ sentiment remained positive, noting “this is expected to be boosted as Q2 result hit the market in the weeks ahead. Despite the muted demand, appreciation by high priced equities lifted the market to new high.”
“Equities in the Financial Services provide opportunity for speculative investing. Equities in the Consumer Goods, Conglomerates and Industrial Goods provide good window for long term-position,” market analysts at Partnership Investment Company further say.
Also, analysts at UBA Capital plc say: “Equities market began H2:2014, on a bullish note with a 2 percent return for the week as YtD return stands at 4.12 percent – index level hit a 5-year high of 43,031.81 points at the close of last week.”
Though they note that demand was further strengthened in the fixed income market on the back of attractive yields, these analysts say that “with the start of earnings season by companies, particularly the banks, we expect a boost in market activity on the back of anticipation of result and reactions to some impressive result.”
Market analysts at Financial Derivatives Company Limited say opportunities still exit in the stock market despite risks. “Finance sector remains stable and may hold hidden value. NSE Banking index down 3.5 percent YTD but continues to improve. Consumer goods have been limited by waning demand and rising costs. NSE Consumer index down 5 percent YTD. However, FMCGs continue to invest in capacity and efficiency. Return in demand should precede sector’s rebound,” these analysts say.
They further note that they expect growth to continue in Q3. “Growth to be driven by consumer and finance sectors – market growth of about 5 percent. No pleasant surprises expected in Q2 earnings releases,” these analysts add, noting that foreign investors are returning cautiously to Nigerian equities while market is driven by domestic investors, but politics is limiting deals.
Morgan Capital analysts note that the Nigerian equities market closed H1 2014, on a positive note, despite the sluggish start to the year. The ASI recorded a year-to-date gain of 6.1 percent (year to June 30, 2014). “The oil and gas sector was the best performing sector in H1 2014. The oil and gas sector was up by 51.1 percent year-to-date. The only other sector that closed H1 2014, on a positive, was the industrials sector which was up by 3.7 percent. The laggards were the Banking sector which recorded a 3.1 percent decline, the Consumer goods sector which recorded a 4.2 percent decline and the Insurance sector, which declined by 9.1 percent to close H1 2014, as the worst performing sector. On a week-on-week assessment, the market recorded a gain of 1.29 percent to close the week firmly in the green,” these analysts note.
Iheanyi Nwachukwu
