As Nigeria’s path to economic management gradually becomes clearer to many investors, together with the expectation that recent easing stance of the Monetary Policy Committee (MPC) augurs well for banks’ earnings going into second-half (H2) of this year, stock investors are buying into these positives which could trigger improved returns at the equities market.
The possible rub-off effect of President Muhammadu Buhari’s announcement of cabinet members and expected improvement in third-quarter (Q3) earnings which most companies could release later this month are giving investors hope to favour equities in their portfolio pick.
The market may witness further bargain hunting activities this week as the coast seems clearer and stocks’ valuation remains attractive, though it is expected that speculators will not fail to lock-in on profit which will cause the market to trade sideways but tilting towards the positive.
“Based on the current market mood, we anticipate that the equities market will close positive at the end of the four trading days in the week”, research analysts at Meristem said in their recent equity note.
In the first two trading days of this week, improved buy activities in equities at the Nigerian bourse attracted in excess of N96billion in terms of value. Equity analysts expect the positives in the stock market to slightly offset expected profit-booking.
Before now, negative performance of the Nigerian equities market was partly linked to the limited participation by foreign investors who have alluded that the local currency was not being ‘fairly priced’ against the green back.
Leveraging on this gap, domestic investors are closing-in on their equities deal position at the Nigerian Stock Exchange.
For instance, at the close of stock deals in August, foreign investors accounted for 55.69percent of equities deals from a high of 62.91percent in the preceding month of July while domestic investors closed-in at 44.31percent from low of 37.09percent.
“Easing stance of the MPC is expected to bode well for banks’ earnings going into H2-15. We will likely see a moderate re-pricing in banking stocks, especially the Tier-1 banks this week,” according to United Capital analysts. They added: “Thus, we look to see a marginally positive return for the week.”
“This week, performance gauges may trend downwards as profit-taking sentiment takes hold,” said market analysts at Access Bank plc.
In line with analysts’ expectation, the Nigerian bourse witnessed sustained buy pressure and bargain hunting opportunities despite only three trading sessions last week.
Recall that the Nigerian Stock Exchange (NSE) All-Share Index (ASI) appreciated by 0.69percent to close last week at 30,543.17 from 30,332.68 points.
Also, week-on-week (WoW), the market capitalisation of listed Nigerian equities increased by N73billion to N10.497trillion from N10.424 trillion recorded at the beginning of last week.
It was a three-day trading week as the Federal Government of Nigeria declared Thursday 24th and Friday 25th of September, 2015 as Public Holiday in commemoration of the Eid-el-Kabir Sallah celebration.
All the Indices finished higher in the review week with the exception of the NSE Banking and NSE Pension Indices that shed 0.66percent and 0.28percent respectively, while the NSE ASeM Index closed flat.
Iheanyi Nwachukwu
