A mix of a lull in corporate actions, shift of foreign buyers’ attention to global monetary authorities meetings, and profit-taking activities will likely outweigh any form of bargain activities at the Nigerian bourse this week, thereby dousing the possibility of achieving a positive end to market activities this week.
Equity buyers receded in their earlier increased pricing last week leading to a negative close in the benchmark index and yea-to-date (Ytd) performance in negative of 0.49 percent.
Following another negative take-off this week (after profit-taking activities and speculations that trailed equities market), investment analysts believe that recent undervalued stocks still offer significant upside potentials for value hunters, despite that many investors are caught up in mixed feelings about the directions of equities market.
As domestic investors continue in their wait-and-see approach, foreign institutional buyers still weigh the possible impact of Nigeria’s macro challenges like declining earnings from oil due to fall in oil price.
This does not bode well on the forex market with a spillover over effect on companies’ earnings.
Recently, Otaviano Canuto, senior advisor on BRICS Economies in the Development Economics Department of the World Bank, noted how those oil-exporting countries that prepared themselves for the downward phase of the price cycle, constituting fiscal, and international reserve buffers during good times, had been able to cope better with the new scenario.
He however said that “for all the others, besides realising what a high premium must be attached to diversifying the economy from an excessive dependence on a single commodity, there is the template for future upward cycle phases left by those successful hoarders.”
The declining foreign buffer and its negative impact on forex market is affecting foreign investors’ sentiment on Nigerian equities. Foreign investors still control reasonable percentage of equities trading at the Nigerian Stock Exchange (NSE).
Investment analysts at Lagos-based United Capital expect the profit-taking activity that has characterised the market in recent time to be sustained this week.
They said: “We think foreign investors will be relatively quiet this week as attention shifts to global monetary authorities’ meetings, especially in the advanced economies.
“Furthermore, we do not anticipate exciting corporate actions or numbers to tickle investors this week. On this note, we expect the market to close the week marginally negative.”
At the NSE, the All-Share Index and market capitalisation depreciated by 1.48 percent, respectively, to close last Friday at 34,485.72 points and N11.751 trillion, respectively.
All the indices finished lower last week with the exception of the NSE Insurance and NSE Industrial Goods indices that rose by 2.56 percent and 0.64 percent, respectively. Also, the NSE ASeM index closed flat when compared with the preceding week.
“It is likely that profit-taking activities will continue and further push key indicators southwards,” said Rotimi Peters-led team of economic intelligence at Access Bank plc.
“We anticipate renewed bargain hunting activities, particularly on undervalued stocks which present significant upside potentials,” according to analysts at Lagos-based investment house, Cowry Asset Management Limited.
Iheanyi Nwachukwu
