Analysts link market rebound to earnings, low interest rate
The ongoing civil unrest across the country weighed on investors’ sentiment, as activity levels remained weak with the value of trade falling 14.4% week-on-week (w/w).
The Mid-week sell-offs resulted in the market recording its biggest loss since October 7th, as the ASI declined by 0.8.
Surprisingly, bargain-hunting in the last two trading sessions of the week (Thur: +0.4%; Fri: +0.5%) completely wiped off the week’s losses and pushed the market into the green.
Consequently, the Nigerian Stock Exchange (NSE) All-share index and market capitalisation both appreciated by 0.13% to close the week at 28,697.06, and N14.999 trillion, respectively.
However, all other indices finished lower with the exception of NSE-Main Board, NSE 30, NSE MERI Growth, and NSE Consumer Goods, which appreciated by 0.79 per cent, 0.14 per cent, 0.68 per cent, and 2.86 per cent, while the NSE ASeM Index closed flat.
Analysts linked the rebound to earnings expectations, as more companies are yet to release their numbers to enable investors and traders ascertain their status of each company and earnings power that will support full-year dividend pay-out. The market has, so far, reacted positively to the few numbers that beat expectation and forecast.
In addition, they said the low interest rate regime and yields in the fixed income market has continued to support the equity price rally.
Analysts at Codros Capital said: “Despite the heat in the socio-political landscape triggered by the degeneration of the #ENDSARS protests, we do not expect a material dent to investors’ appetite for stocks.
“We reiterate that pent up system liquidity and the hunt for alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market remain positive for stocks. However, we advise investors to trade in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.”
Further analysis of last week’s transactions showed that a turnover of 1.505 billion shares worth N19.668 billion was recorded in 20,552 deals week by investors on the floor of the Exchange.
This is in contrast to the 1.955 billion units valued at N22.978 billion that exchanged in 22,844 deals during the preceding week.
The financial services industry (measured by volume) led the activity chart with 1.196 billion shares valued at N14.950 billion traded in 11,318 deals; thus contributing 79.47 per cent to the total equity turnover and value, respectively.
The conglomerates industry followed with 97.167 million shares worth N269.045 million in 516 deals.
The third place was the consumer goods, with a turnover of 77.588 million shares at N1.928 billion in 3,461 deals.
Trading in top three equities namely Guaranty Trust Bank Plc, Access Bank Plc, and United Bank for Africa Plc (measured by volume) accounted for 633.527 million shares worth N10.006 billion in 3,887 deals, contributing 42.08% to the total turnover.
A total of 284,105 units of ETF, valued at N2.090 billion were traded in 44 deals compared with the 701,543 units worth N6.051 billion transacted last week in 44 deals.
A total of 19,811 units valued at N25.898 million were traded this week in 10 deals compared with the 19,475 units worth N23.752 million transacted last week in five deals.
About 28 equities appreciated in price during the week, lower than 35 equities in the previous week, and 35 equities depreciated, higher than 23 equities previously, while 99 equities remained unchanged, lower than 104 recorded a week ago.