The stock market has started responding to the activities of investors who have started selling their stocks in order to meet transaction needs this yuletide season.
Due to this development, the Nigerian stock market that last week yielded 33.55 percent in year-to-date (ytd) returns as evidenced in All Share Index of 27, 685.54 took off this week at a low level of 27,492.89.
Though, blue-chip stocks, consumer goods stocks, and banking stocks have shown impressive performances since this year, their performance this week would likely be limited due to the sell-pressure envisaged this week in the market.
Before now, market watchers had envisaged this outcome, particularly with the year-end festivities around the corner.
“We are of the view that the index may record a momentary dip this week ahead of market closure early next week as investors sell shares to meet transactionary needs,” say market analysts at Access Bank plc.
Gregory Kronsten-led team of analysts at FBN Capital says: “We can see from our chart the year-to-date performance of the NSE and its counterpart in Kenya. Lagos was the laggard for most of the year until mid-September, then succumbed to profit-taking and has recovered strongly in the past 10 days to lead its rival by close to eight percentage points in terms of ytd gains.”
These analysts note in their report titled ‘Lagos ahead but not likely to take off,’ that “Offshore investors are driving both markets, and sentiment has favoured the more liquid frontier Exchanges. Nairobi has by far the more diverse exchange in terms of sectoral composition. It also has a strong sub-regional story to sell: the near-captive market that Kenyan business enjoys across East Africa.
“That said, Nigeria has the higher growth and growth potential. The slowdown has trimmed its GDP growth to about 6.5 percent year-on-year (y/y) but the impact of the global headwinds has been restrained. The banks are the favoured segment in Nigeria, given the AMCON effect on the industry and the attractive book values.”
Analysts at Partnership Investment Company plc, who note that the market closed last week on a positive note as bargain hunting activities outweighed profit-taking activities, say “We expect this to continue in the short term as investors are more inclined to take a more bullish investment approach.”
They advise investors to make investment decisions based on their risk appetite and return expectations, as “growth and value stocks should be the focus in order to derive maximum benefit. Stocks with strong fundamentals should be given priority.”
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