The bear pressure at the Nigerian equity market is still lingering despite that the market began this week in the positive territory with industrial goods sector contributing most gains.
Despite attractive stock prices that create reentry points for value hunters, most analysts are bearish on equities because investors are yet to see corporate actions or declaration that could activate stock buying sentiment.
Declining crude oil earnings, as well as pressured naira against the greenback and its spillover on corporate performances have made Nigerian equities less attractive to investors –particularly the institutional and foreign buyers.
Early this week, crude oil futures inched up in thin trade as many Asian markets were on holiday for Lunar New Year, with few trading cues expected until Federal Reserve Chair Janet Yellen gives testimony to lawmakers.
Crude oil prices jumped as much as 2 percent last Tuesday, shrugging off big drops in Japan’s stock market and eroding some of the previous session’s losses that were driven by festering concerns about global oversupply.
Portland Paints and Products Nigeria this week announced plans for a rights issue. The company submitted application to Nigerian Stock Exchange for approval and listing of rights issue of 600 million ordinary shares of 50 kobo each at N3.30 per share on basis of 3 new ordinary shares for every 2 ordinary shares held.
“Reiterating the market’s bearish sentiment is the market breadth which worsened last week to 0.7x (previously 1.2x) as 28 stocks appreciated in price compared to 40 price decliners. Bearish sentiment is expected to persist this week on the back of no expectation of positive news flow to trigger a market rebound,” according to research analysts at Lagos-based United Capital plc.
“We expect the bear pressure to linger in the absence of positive corporate actions,” said market analysts at Cowry Asset Management Limited.
Last week index movement showed that the NSE All-Share Index depreciated by 1.73 percent to close at 23,501.87 points from 23,916.15 points; while the value of listed equities measured by the market capitalization declined by N142billion from N8.225trillion to N8.083 trillion.
Similarly, all other Indices finished lower during the review week, with the exception of the NSE ASeM Index, NSE Insurance Index, and the NSE Oil/Gas Index that appreciated by 0.07percent, 0.86percent and 4.02percent respectively.
“We expect the past week’s mixed trading pattern across major sectors to continue this week even as investor sentiment remains largely bearish”, said research analysts at Vetiva Capital Management Limited.
“The poor performance observed in the market was fuelled by poor financial results released by some listed companies last week. This week, we anticipate that performance gauges may remain less impressive, as the sell-off persists,” said the Rotimi Peters-led team of economic intelligence at Access Bank plc.
Amid last Monday’s gains, analysts at Dunn Loren Merrifield said the equity market may be mixed this week due to investors’ apathy towards equities.
The analysts said, “With the expectation of FY’15 earnings, smart money investors may be taking advantage of the wild swings in equities which have made the market to develop a near-term bottom, which suggest the market is being oversold in technical terms”.
Iheanyi Nwachukwu
