The opinions of most equity analysts about Nigerian stocks seem to tilt in favour of bargain activities as most stock buyers now see opportunities in value stocks after recent downbeat.
Before now, stock investors had approached the equities market with care sighting prevailing risks that remain in the economy.
With over N300billion lost last week at the stocks market despite mild bargains recorded in the later trading days, the recorded choppy deals could signal gradual return of value hunters who are seeking a reentry into the market. Already, we are in the much expected September when key ministerial appointments are expected to be announced by President Muhammadu Buhari.
Before now, most foreign investors who are major buyers of Nigerian equities reduced their stake in Nigerian equities as they carefully await clearer policy direction of Nigerian government –of which names that make key ministerial appointments could serve as a clue to investors. Year-to-date (ytd) foreign investors accounted for 54.21% of equities transactions while domestic investors accounted for 45.79% as shown in the analysis of transactions for the period ended July 31, 2015.
“We anticipate bargain hunting activities as investors seem to perceive the political appointments made by the President positively even as they awaited further appointments into ministerial posts,” according to research analysts at Cowry Asset Management Limited.
The analysts had also noted that Nigerian equities market which witnessed sustained bearish activities for the most part of last week, punctuated by a rally on Friday following the announcement of President Muhammadu Buhari’s new political appointment to key offices.
The value of listed Nigerian equities –measure by their capitalisation dropped from last week open highs of N10.241trillion to N9.908trillion at the close of transactions last Friday, a decline of about N333billion.
The Nigerian Stock Exchange (NSE) All Share Index (ASI) also lost 1,063.71points from 29,878.33points to 28,814.62points, indicating a decline of 3.56%.
“Taking a cue from the global equities rout and continued slide in oil prices, the local bourse remained in the red zone last week. A cocktail of headwinds including the recent sharp fall in oil prices and weak GDP growth in the second-quarter (Q2) of the year weighed on investors sentiment. This week, we expect market to remain bearish in the wake of poor economic data,” according to team of economic intelligence at Access Bank plc.
“Equities market dipped by 9.8% and 4.5% in the months of July and August respectively largely on declines in value stocks. These stocks have become increasingly attractive for value investors hence we expect some bargain hunting this week, though overall bearish sentiment will continue to play out,” said research analysts at United Capital plc.
The analysts noted that that “large isolated institutional buying at the near bottom prices propped up equity prices last week, implying the late rally may not be sustainable as market fundamentals remain week. Although we expect slight improvement in Nigerian equities this week, tamer emerging market funds flow on the back of weak macro outlook will cap equity gains for the week.”
Iheanyi Nwachukwu
