Equity investors are showing preference for shares of companies with the history of dividend payment as more corporate earnings trickle in at the Nigerian Stock Exchange (NSE).
While many stocks are seen trading below their actual market value following recent spate of sell-off, many investors have renewed their buy-decisions by adding some of such stocks into their equity portfolio in search for improved dividend yield.
Investors –particularly foreign investors have been on the sideline at the equities market with most of them fearing increased forex risk as the local currency weakens against the greenback.
Naira weakened to a record N345 to the dollar on the parallel market on Monday, increasing pressure on the government to devalue the official exchange rate to narrow the gap and spare companies from huge bills resulting from offshore deals.
Nigerian equities gained a remarkable N408billion last week as investors’ interests in dividend paying stocks peaked. The increased demand for Nigerian stocks continued in the early trading days of this week.
“While overall market sentiment remains fragile, we expect to see a good level of demand in equities this week as investors sustain preference for dividend paying stocks. This should extend market momentum in the near term amid bursts of profit taking,” said research analyst at Lagos-based investment house, United Capital plc.
“Following a steep correction recorded in the preceding week, the market posted further gains as equities traded on a positive note led by stocks in the industrial goods and oil & gas sectors,” research analysts at Dunn Loren Merrifield said in their yesterday equity note.
Accordingly, the analysts noted that “given the increasing positive anticipation of FY’15 results, investors appear to be relatively upbeat at the moment and are starting to take position which has attracted substantial turnover since the beginning of the month. With the current oversold position, market has remained in buying range after hitting 22,456.32 point level in January.”
Research analysts at Lagos-based investment house, Meristem Securities said: “While we anticipate that this may be a generally weak earnings season with regards to financial performances, we opine that expectations of dividend disbursements, and proposed corporate actions made attractive by the current level of market prices might spur demand regardless. Hence, we envisage that market activities might be relatively positive over the coming month as the earnings season gets into full flow.”
The value of listed Nigerian equities which opened last week at N8.083trillion rose remarkably to N8.491trillion at the close of trading on the Nigerian Stock Exchange (NSE), while All Share Index (ASI) which tracks the performance of the local bourse rose by 5.05percent from 23,501.87points to 24,689.69 points.
Twenty-six (26) equities appreciated in price during the review week, lower than thirty (30) equities in the preceding trading week. Also, thirty (30) equities depreciated in price, lower than forty (40) equities in the preceding trading week, while one hundred and thirty-four (134) equities remained unchanged, higher than one hundred and twenty (120) equities recorded in the preceding trading week.
Oil prices surged to their highest levels in more than a week as news of a meeting of top officials from the world’s biggest oil producers spurred speculation of an eventual deal to tackle a deep supply glut.
The Consumer Price Index (CPI) report published by the Nigeria Bureau of Statistics (NBS) shows that January headline inflation printed at 9.6 percent year-on-year (y/y) same as December 2015, largely supported by an unchanged level of acceleration in food inflation which accounts for 50.7percent of the CPI at 10.6percent y/y. Core inflation came in marginally higher at 8.8percent y/y compared to the 8.7percent y/y recorded in December owing to a quickening in the major sub-categories of Transportation, Communication and Clothing & Footwear.
Iheanyi Nwachukwu
