Given that oil price declined further to a new low, investor sentiment at both the equity and bond markets tilts in favour of the bears.
There has been speculation among investors (foreign / local) on the outcome of Nigeria’s 2015 general election.
The recent decline in oil price, which led to reduction in budgeted benchmark oil price, has now worsened the market outlook as it triggered sell-off at the local bourse.
Most third-quarter (Q3) results released recently by listed companies could not help to save the market sliding situation.
For equity investors, analysts say they expect that the bearish tone, which contributed to dipping further the Year-to-Date (YtD) return at the local bourse, will continue this week on weakening oil price.
For investors in the bond market, analysts’ outlook for this week is bearish across the curve given the persistent pressure on crude oil price.
The NSE All-Share Index and Market Capitalisation depreciated last week by 7.42 percent to close at 30,763.38 points and N10.156 trillion, respectively. Similarly, all the indices drifted lower during the review week with exception of the NSE ASeM Index that rose by 2.05 percent.
“The slide in the market reflects investor caution fuelled by worries over the outlook of the Nigerian economy,” said market analysts at Access Bank plc, who also said that bearish tone of the market will persist this week.
Amid this outlook, the stock market portends an opportunity for bargain hunters as recent bear reign continues to create buy opportunities, particularly on value stocks.
“Across comparable markets and selected advanced markets, the NSE remained the laggard in performance,” said market analysts at BGL plc.
Stock investors have resulted to strong flight to safety. There has been capital reversal on the back of oil price decline which continued to threaten FX. Another negative factor affecting the equities market is the outlook for 2015 elections.
“Tighter monetary policy environment and weaker currency outlook portend further depression forthe stock market. Weaker banks’ earning outlook for 2014 is a low point. We however expect the market to at least recover ground lost this year in 2015 based on strong risk adjusted valuation of Nigerian equities on current price depression,” BGL analysts noted in their recent outlook on the market.
In the same vein, investment analysts at Lagos-based UBA Capital plc, “The bearish sentiment in the local bourse continues to reflect the undercurrents of oil price slump and political uncertainties. The market remains glaringly oversold, with sentiment indicators still pointing to a bearish outlook.”
The analysts stated, “we expect concerns around the outlook of the naira to cap foreign appetite for Nigerian equities in the medium term though our longer term outlook remains positive, strictly from a valuation standpoint.”
On the performance of the stock market this week, the analysts said, “our technical indicators are signaling a negative close, though we might see mild gains in few names as bargain hunters take advantage of rock bottom prices of banking counters.”
Last week, a turnover of 1.810 billion shares worth N28.918 billion in 20,677 deals were recorded at the Nigerian Stock Exchange in contrast to a total of 1.526 billion shares valued at N24.992 billion that exchanged hands the preceding week in 21,344 deals.
Ten (10) equities appreciated in price in the week under review, lower than 26 equities of the preceding week. Sixty-eight (68) equities depreciated in price higher than 49 equities of the preceding week, while 119 equities remained unchanged lower than 122 recorded in the preceding week.
The Financial Services Industry (measured by volume) led the activity chart with 1.370 billion shares valued at N13.783 billion traded in 11,742 deals; thus, contributing 75.69 percent and 47.66 percent to the total equity turnover volume and value, respectively. The Consumer goods Industry followed with a turnover of 137.115 million shares worth N9.368 million in 3,583 deals. The third place was occupied by the Conglomerates Industry with 93.133 million shares worth N567.167 million in 1,256 deals.
