The possible effects of looming sell-down decision by many investors who are contemplating taking profit on equities leveraging the recent gains recorded will in the near term impact negatively on the prices of some equities at the Nigerian bourse.
Despite new listings – Seplat Development Company plc and the most recent (Caverton Offshore Support Group plc) stocks, the market is yet to retain the needed liquidity that is capable of igniting the bull-run.
Analysts noted that last week’s rally, which buoyed the market 1.20 percent, lacked in fundamental justification, especially as domestic and foreign fund managers turned-off the tap on liquidity flow into equities.
Taking a look at equities, market analysts at UBA Capital plc said they expect modest headroom for haircut on equities.
In their view, equity analysts at Cowry Asset Management Limited said they anticipate a mixture of bargain hunting and profit taking this week, adding that “recent price rallies initiate profit-taking activities.”
“The Nigerian equity market should turn mildly bearish in the week, as expected profit taking within the Financial and Consumer Goods basket should pressure the composite index. Trading activity level is seen relatively stable, as investors remain circumspect in view of the monetary policy committee meeting,” UBA Capital plc stated.
The year-to-date (ytd) return in negative of 5.59 percent which the equity market recorded last week further made case for moderated inflows this year into the equities market – a development analysts said was driven by decision of foreign investors who were said to have priced in recent risks in Nigerian.
Meanwhile, market analysts at Access Bank plc noted that the prospects of capital and attractive dividends payout may have also contributed to the positive market trend observed last week.
“This is in addition to the impact of commendable Q1 2014 financial reports of companies in the oil and gas, fast moving consumer goods, building and construction and hospitality sectors. The analysts said the market may remain bullish on release of more financial scorecards, which they noted may excite investors. The announcement of the change in baton in the presidency of the Nigerian Stock Exchange would further support our outlook – market stakeholders hailed the development, saying it is a reflection of stability in the nation’s bourse,” Access Bank analyst said.
Iheanyi Nwachukwu
