Nigerian equities market may witness a blend of bargain hunting activities on low priced value stocks; and possible sell-offs as most stock investors toss for profit following recent gain.
Amid concerns about macro uncertainties, issues around forex and volatile oil prices seen to be affecting sentiments for naira assets, most bargain-hunters still see opportunity in value stocks at the local bourse.
Despite this, there is still possibility of choppy deal resulting from investors move to reduce loses they had booked before recent rally.
The Nigerian equities value rose by about N530billion in just seven days. The equities market capitalisation which opened recently at N9.909trillion appreciated N10.439trillion at the close of deals last week, while the Nigerian Stock Exchange (NSE) All Share Index (ASI) rose from last week open level of 28,814.62 points to 30,358.87points at the last week, an indicating of improved bargain activities at the local bourse.
“While valuations remain attractive with market trading on a trailing P/E of 8.8x, we think bargain hunting witnessed last week will wane in the coming trading sessions as we are likely to see some level of profit taking towards the close of the week. Thus, we foresee a marginal loss in the market for the week,” said research analysts at United Capital plc.
“We anticipate a mix of bargain hunting and selloffs as investors flip for profits on the back of recent capital appreciation on their holdings”, said research analysts at Lagos-based Cowry Asset Management Limited.
“This week, the performance gauges may trend downwards as profit-taking sentiment take hold” according to economic intelligence team at Access Bank plc. They had attributed the rally in the stock market last week to bargain hunting activities by investors on lowly priced stocks with good fundamentals.
President Muhammadu Buhari led administration has not come out with a clear economic policy or blueprint for Nigeria –a situation which makes many investors to stay on the sideline in betting on naira assets, particularly equities. The situation is even worse as plunge in oil prices worsen already difficult situation for our economy managers.
Some schools of thought within the market foresee an increase in stock buying particularly in the fourth quarter (Q4) of 2015, following President Buhari reassurance of appointing his ministers this month –it further comforts many investors who have waited so long for this.
Recently, Bismarck Rewane led team of analysts noted at the Lagos Business School breakfast session that the impact of this policy blankness is increasing the nervousness of investors. The analysts opined that volatility in the FX and interest rate markets is evidence of consumer and investor anxiety.