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Anxiety over H1 results, inconsistent policies trigger investor apathy

Anxiety over H1 results, inconsistent policies trigger investor apathy

Chief Executive Officer (CEO) of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema

• Analysts predict gloomy outlook as index dips 0.12%
• Insist undervalued market creates new entry opportunities

Expectations of poor half-year, inconsistent government policies and rising COVID-19 cases have continued to trigger apathy on the equities sector of the Nigerian Stock Exchange (NSE).

Consequently, at the close of trading last week, the NSE All-share Index and market capitalisation both depreciated by 0.12% to close the week at 24,306.36 and N12.680 trillion, respectively.

All other indices finished lower with the exception of NSE CG, NSE Premium, NSE Banking, NSE Pension, NSE-AFR Bank Value, NSE AFR Div Yield, and NSE MERI Value Indices.

A breakdown of trading last week showed that the bearish run persisted, as gains on Tuesday, Wednesday, and Friday were insufficient to lift the market fortunes.

Specifically, the NSE extended the bearish sentiments at the reopening of transactions on Monday, even as more blue-chip stocks depreciated in price, especially Beta Glass and Julius Berger, resulting in a further slide in the market capitalisation by N162 billion.

The All Share Index (ASI) shed 310.07 points or 1.27 per cent to 24,026.05 points. Accordingly, investors lost N162 billion in value as market capitalisation dropped to N12.533 trillion.

The downturn was impacted by losses recorded in medium and large value stocks, including Nestle Nigeria, Beta Glass, BUA Cement, Julius Berger, and C & I Leasing.

Following bargain-hunting in most blue-chip stocks, the equities market halted three days losing streak to close in an upbeat Tuesday, causing the All-Share Index (ASI) to increase by 0.30 per cent.

The index appreciated by 71.43 absolute points, or 0.30 per cent to close at 24,097.48 points. Similarly, the market capitalisation gained N38 billion to close at N12.571 trillion.

The upturn was impacted by gains recorded in large and medium value stocks, including; Airtel Africa, BUA Cement, Zenith Bank, Red Star Express, and PZ Cussons Nigeria.

Amid sustained bargain-hunting, the NSE extended its winning streak to the second consecutive trading Wednesday, as market capitalisation gained additional N94 billion.

Specifically, the All Share Index (ASI) increased by 180.59 absolute points or 0.75 per cent to close at 24,278.07 points. Similarly, the market capitalisation garnered N94 billion to close at N12.665 trillion.

The uptrend was impacted by gains recorded in large and medium capitalised stocks including Julius Berger, Guaranty Trust Bank, Lafarge Africa, Okomu Oil, and Zenith Bank.

As a result, analysts predict gloomy outlook, as the wave of apathy and pullbacks persist, resulting to a further decline in investor confidence

However, they argued that the undervalued state of the market creates new entering opportunities for short and medium terms capital appreciation.

Specifically, the Chief Research Officer, Investdata Consulting, Ambrose Omordion, said economic recovery is threatened by the rising cases of the COVID-19, ahead of the Q2 earnings reports season, which implies that opportunities are still available as sectoral rotation continues.

“Also, sectors that have suffered oversold, so far, offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment.

“Given that investors have long before now been factoring this expected disappointing half-year results into their pricing metrics, negative reaction when the numbers finally hit the market, may not be as severe.

“For immediate liquidity or cash let us trade low priced stocks with serious caution to avoid being trapped. Again, the current undervalued state of the market offers opportunities for repositioning for the short, medium and long-term.

“This is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation going forward. Also, sectors that have suffered oversold, so far, offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment,” he said.

Analysts at Afrinvest, said: “We anticipate a halt in the bearish sentiment in the coming week as investor confidence improves.”

Similarly, Codros Capital said: “In our opinion, risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions.

“Thus, we continue to advise investors to trade cautiously and seek trading opportunities in only fundamentally justified stocks.”

Further breakdown of last week’s trading showed that a total turnover of 901.542 million shares worth N13.453 billion was recorded in 18,676 deals by investors on the floor of the Exchange.

The financial services industry (measured by volume) led the activity chart with 629.368 million shares valued at N5.186 billion traded in 9,887 deals; thus contributing 69.81 per cent to the total equity turnover volume.

The ICT industry followed with 59.506 million shares worth N5.161 billion in 684 deals. The third place was the consumer goods industry, with a turnover of 57.136 million shares worth N1.385 billion in 2,993 deals.

Trading in the top three equities namely Guaranty Trust Bank Plc, Fidelity Bank Plc, and Zenith Bank Plc. (measured by volume) accounted for 293.678 million shares worth N4.042 billion in 4,334 deals, contributing 32.58 per cent to the total equity turnover.

A total of 301,094 units valued at N2.384 billion were traded this week in 14 deals, compared with a total of 358,114 units valued at N1.912 billion transacted during the preceding week in 25 deals.

Also, 11,487 units of bonds, valued at N14.769 million were traded last week in 13 deals compared with a total of 4,590 units worth N5.515 million transacted during the preceding week in 14 deals.

Also, 25 equities appreciated in price during the week, higher than 13 a week ago, while 33 equities depreciated, lower than 59 in the previous week.

About 105 equities remained unchanged, higher than 91 a week earlier.

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