The outlook
The positive sentiments that trailed the equities market will continue this week as a number of full-year results are expected before the trading week closes.
With the release of some companies scorecards and their boards’ decision to reward investors, companies with good dividend payment history stand to enjoy share price appreciation as investors take position in anticipation of corporate rewards.
Among other big names whose scorecards are expected in the market, Transnational Corporation of Nigeria plc released its FY 2013 financials, which shows it proposes to pay dividend for the first time in its history.
As a result of the expectations of sustained QE tapering by United States, financial markets in emerging and frontier economies have been experiencing reduction in inflows as foreign investors from developed markets continue their portfolios readjustment to benefit from higher returns in their markets.
Despite this trend, increased demand for Nigerian equities that pushed prices upward last week and moderated the stock market’s year-to-date (ytd) loss to 4.28 percent is expected to continue this week, especially as banks’ earnings season renews investor interest in equities.
It is also expected that supply will further thin out this week as investors continue to hold back sell orders in further anticipation of price upticks. Also, following developments at the CBN, the market’s speculation that purported hike in CRR to 100 percent may be suspended, and may make banking stocks trade stronger – at least till next MPC meeting.
Analysts justify the outlook
Investment analysts at Morgan Capital noted that investors favour companies with rich dividend history, “with year-end numbers due to be released any time from now and the prospect for dividend declaration high for such companies. Going into the new week, we expect the positive sentiments to continue with a number of full-year results expected before the trading week closes.”
Supporting this view, analysts at Cowry Asset Management said: “This week, we foresee sustained bullish activities amid expectations of positive corporate actions as more listed companies release their full-year results.”
Rasaq Abiola-led team of analysts at UBA Capital expect March to be a positive month for equities, “especially as banks’ earnings season should stimulate renewed investor interest.”
“We expect weak liquidity but modest rally: Posting the best weekly performance in the year, equities recovered strongly last week; the NSE Index rallied 3.3 percent, moderating its YTD loss to 4.3 percent. In expectation of banks’ earnings season next week, we look forward to modest rally on stocks, particularly banking counters which trade at attractive 7 percent average dividend yield. However, trading activity may be weak, as local investors remain cautious,” the analysts added.
“This week, we expect the market to thrive on the growing confidence with attendant impact on increasing trading. The optimism will likely continue with investors grabbing more shares in anticipation of more encouraging performance in company financials,” said Tony Monye-led team of economic intelligence at Access Bank plc.
Meristem Securities analysts said while past events and news flow may still affect the market going forward, “we believe attractive 2013FY numbers for some sectors remain the major catalyst for positive returns. With the earnings season fast approaching, companies with good dividend payment history will likely enjoy price appreciation as investors take position in anticipation.”
Accordingly, despite the upheavals in the economy of recent, these analysts expect investors to be strategic this month of March, “as companies roll out their results with several corporate actions to appeal investors’ appetite in equities market.”
Market appraisal
The NSE All-Share Index (ASI) and market capitalisation appreciated by 3.30 percent to close last Friday at 39,558.89 and N12.707 trillion, respectively.
With the expectation of continued buying activities at the bourse, market review shows that six out of eight of the NSE sector indices appreciated last week. The NSE 30 index rose by 3.61 percent to close at 1,777.82. The NSE Consumer Goods rose by 2.41 percent to close at 1,007.78.
The NSE Banking appreciated by 6.99 percent to close at 384.45. The NSE Insurance index also rose by 3.49 percent to close at 146.67. The NSE Lotus II index edged up by 1.02 percent to close at 2,839.96, while the NSE Industrial Goods index appreciated by 1.44 percent to close at 2, 568.76. The NSE Oil/Gas index declined by 1.34 percent to close at 301.49, while the NSE-ASeM index depreciated by 0.35 percent to close at 959.63.
Also, 51 equities appreciated in prices during the week under review, higher than 17 equities in the preceding week. Twenty-six equities depreciated in prices lower than 62 equities of the preceding trading week, while 121 equities remained unchanged, higher than 118 equities in the preceding trading week.
