The NSE ASI has been on a losing streak this month, shedding 223 basis points (vs. 70 basis points gain in January). The pricing of the equities market against basic fundamentals continues as weak sentiments amplify.
Trading activities on the floor of the NSE ,relative to January had amixed undertones. Volume of shares traded rose by 13.7 percent (at the close of trade on Friday) to 4.73 billion units (vs. 4.16bn in January). This level of activity was driven by bulk transactions in the shares of UBA.
In transaction value, N24.21 billion shares have been executed. This is 9 percent lower than N27.21 billion traded in January. No thanks to the persistent price drop so far in the month.
Market shares and movers
We highlight below the top and bottom 10 market performers for the month, using market data available as of Friday, February 17, 2012. The outperformers cart dominated by the financials accounted for 7.4 percent market capitalisation.
Access led winners group delivering a whopping 34.2 percent. This implies expectation build-ups in the fundamentals of the bank ahead of its 2011FY results.
Eterna Oil was second on the ranking, posting 33.5 percent capital appreciation over the space of 12 days in the month. This is an interesting performance, which is not unconnected with the company’s 2011 quarterly performance and a strong expectation of impressive full-year numbers. Market sentiments tilt toward the company rewarding investors with dividend after five long years of no corporate actions.
From the underperformers’ camp, Julius Berger (construction) topped the cart, sliding 30.1 percent. Surprisingly, consumer goods sector represented by Dangote Sugar, Honey Flour, and Dangote Flour accounted for 30 percent of the fallers’ camp. CCNN, which marked a seven-month low sat on the 10th place on the performance ladder.
Global economy
Global markets have been volatile, following considerations of a further Greek bailout. Sparks of hope were ignited as China announced its readiness to support Greece financially. China’s huge foreign reserve ($3.18trn) and the largest in the world places the emerging giant in a strong position to intervene.
The announcement initially boosted investors’ confidence as global stocks rally early in the week. China’s generosity may nevertheless not be unconnected with the efforts to prevent potential Euro zone collapse. The Euro zone is China’s largest export market.
As global markets rally in response to Greek optimism, the possibilities of a concrete progress in resolving the debt crisis is magnified. Chances of a Euro zone break-up however remain slim.
The week ahead
As Euro area debt default crisis continues to gain headlines, we see foreign participation on the sideline. The Nigerian market will remain susceptible to short-term news. We expect to see more cautious trading activities. Investors should focus on the financial (banks) and the consumer goods sectors as they prepare to render their 2011FY results. We create room for earnings surprises and mouth-watery corporate actions.
Technically, the market (NSE ASI) just bounced off its 20,314.07pts support. We see it reaching its 20,500.00 resistance over the coming week. Fundamentally, the NSE ASI is priced at 7.12x P/E and 2.53x PBV multiples, a significant discount compared with 25.45x PE and 1.57x PBV levels of 2009. This fundamental mispricing creates avenue for entry.
However, negative sentiments in the marketplace may influence investors’ behaviours and reactions.
On the summary, current market pricing offers an opportunity for investors to reposition their equity portfolios ahead of the 2011FY earnings season.
