The Nigerian Stock Exchange (NSE) suffered a fourth consecutive weekly loss last week, as growing concerns on the increasing yields in the fixed income market continue to weigh on investors’ appetite.
The development caused the Nigerian Stock Exchange (NSE) All-Share Index (ASI) and market capitalisation to depreciate further by 0.96 per cent to close the week at 39,799.89 and N20.823 trillion.
Similarly, all other indices finished lower except NSE Banking, NSE AFR Bank Value, NSE MERI Growth and NSE Oil/Gas Indices rose by 0.69 per cent, 1.34 per cent, 0.66 per cent and 0.97 per cent while the NSE ASeM and NSE Growth Indices closed flat.
Analysts linked the drop in indices to the sustained increase in marginal rates at the OMO auction last week wherein stop rates for NTB auction results rose by an average of 254bps to 3.67 per cent (from 2.33 per cent recorded at the last auction).
Consequently, the YTD return dipped further in the negative territory, settling at -1.2 per cent. However, activity levels were strong, as trading volumes and value rose by 25.3 per cent w/w and 13.3 per cent w/w, respectively.
Notably, sell-offs in large-cap stocks; NB (-11.9 per cent), Lafarge (-7.6 per cent), MTNN (-3.3 per cent) and Dangote Sugar (-2.7 per cent) drove the weekly loss.
Analysts at Codros Capital said: “In the week ahead, we expect the NSE floor to be flooded with corporate earnings as more companies publish their audited FY 2020 numbers, accompanied by dividend declarations. We believe this should provide respite for market performance.
“However, we expect intermittent profit-taking activities to continue due to lingering concerns about yield elevation in the FI market. “As a result, we think the local bourse will likely exhibit a zig-zag pattern. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”
Afinvest Securities Limited said: “In the coming week, we expect trading sessions to be a mix of bargain hunting and sustained sell-offs. The direction of yields in the fixed income market would also influence trades especially given the sustained increase in marginal rates at the OMO auction this week.”
The Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion said: “Players should therefore be on the lookout, as more companies expectedly roll in their 2020 financials, giving the market an upward push or downward pull, depending on the strength of these numbers.
“With the pullbacks impacting positively on dividend yields, income investors should target stocks with a dividend yield of 7.5 per cent and above in the short term, since the equity market remains the best window for hedging against the nation’s spiralling inflation.
“Despite, the seeming profit booking across many of the sectors, these corrections are creating ‘buy’ opportunities for players that understand the dynamics of the market, irrespective of what is happening on the fixed income side, especially with oil price selling now above $65 per barrel and breakthroughs in vaccines will help to drive global and domestic economic recovery.”
A look at the market performance last week indicated that the Nigerian equities market reopened on a downturn last week Monday, following sell pressure in the shares of Africa Prudential and 25 others, causing market capitalisation to plunge by N17 billion.
The index decreased by 32.61 absolute points, representing a decline of 0.08 per cent to close at 40,154.09 points. Also, the overall market capitalisation value lost N17 billion to close at N21.009 trillion.
The market loss was driven by price depreciation in large and medium capitalised stocks amongst which are; Africa Prudential, Lasaco Assurance, Niger Insurance, Lafarge Africa and Red Star Express.
Following gains recorded by most blue-chip stocks, the NSE halted a five-day losing streak to close upbeat on Tuesday as the ASI appreciated by 0.03 per cent.
The ASI increased by 10.77 absolute points, representing a growth of 0.03 per cent to close at 40,164.86 points while the overall market capitalisation value gained N5 billion to close at N21.014 trillion.
The market gain was driven by price appreciation in large and medium capitalised stocks amongst which are; AIICO Insurance, Livestock Feeds, Flour Mills of Nigeria, Zenith Bank and Cutix.
Trading on the NSE continued in an upbeat manner on Wednesday, occasioned by bargain hunting in the shares of some blue-chip companies, causing market capitalisation to appreciate further by N30 billion.
The ASI gained 56.44 absolute points, representing a growth of 0.14 per cent to close at 40,221.30 points. Similarly, the overall market capitalisation value rose by N30 billion to close at N21.044 trillion.
The uptrend was also driven by price appreciation in medium and large capitalised stocks amongst which are; Oando, Associated Bus Company, Japaul Gold and Ventures, Royal Exchange and Academy Press.
After days of an upward trend, the bears upstaged the bulls on Thursday on the trading floor of the NSE, following price losses suffered by some blue-chip stocks, causing market capitalisation to depreciate by N65 billion.
The market capitalisation of listed equities plunged by N65 billion to close at N20.978 trillion from N21.043 trillion traded the previous day while the index also depreciated by 0.31 per cent or 125.81 points to 40095.49 points from 40221.30 points reported on Wednesday.
Further analysis of last week’s performance showed that a turnover of 1.930 billion shares worth N20.656 billion was recorded in 24,687 deals by investors on the floor of the Exchange, in contrast to 1.541 billion units, valued at N18.235 billion that changed hands in 22,752 deals during the preceding week.
The financial services industry (measured by volume) led the activity chart with 1.450 billion shares valued at N15.070 billion traded in 14,236 deals; thus contributing 75.11 per cent to the total equity turnover volume.
The conglomerate industry followed with 154.906 million shares worth N179.673 million in 798 deals. The third place was the consumer goods industry, with a turnover of 111.782 million shares worth N2.270 billion in 3,865 deals.