Already, investors prefer holding stocks known for consistent policy of dividend payments and bonus declarations.
In anticipation that the market will go further upward this week, the speculative buying that thrived last week and led to broad gains on stocks across most of the sectors at the Nigerian Stock Exchange (NSE) is still placing an upward pressure on the market indicators.
Rising from its meeting early last week, the Monetary Policy Committee (MPC) maintained the benchmark interest rate at 12 percent, and also retained the cash reserve and liquidity ratios of banks at 12 percent and 30 percent, respectively, cited recent rebound in the stock market as one of the positives in the economy that spurred their decisions.
The Committee said despite the benign inflationary outlook, there was the need to maintain tight monetary policy in order to sustain the gains recorded so.
Following this decision on rates, more stock buyers are still optimistic over the possibility of making further entry into the Nigerian stock market, particularly now that the ‘early-bird’ companies with improved financials would be approaching the Nigerian bourse to submit their results, which would likely include dividend and bonuses declarations – a development market analysts believe would further help to buoy the market further.
“Investors are responding, energetically to stock market developments as performance indicators impress. The third consecutive weekly rise came on the back of strong patronage, especially from international investors, buying relatively low bargain stocks showing promising fundamentals. This week, we expect investors to continue to trust their nest-eggs to the basket as confidence grows,” Tony Monye-led team of Access Bank analysts, said in their market analysis and outlook.
“Bargain hunting is fuelling speculation activities as investors seek window of opportunity to make gains. This is expected to continue as the market awaits favourable year-end results. We expect the rally to continue in the coming week with investors seeking value stocks to align with investment strategy,” noted analysts at Partnership Investment Company plc.
These analysts also advised investors to pick equities with strong fundamentals, while also considering their risk appetite and return expectation. “Speculative trading could also be considered by short - medium term investors,” they said.
The stock market Index rallied by 656.31 points last week or 2.12 percent to achieve year-to-date (ytd) gain of 12.48 percent. Also, the equities market capitalisation closed high at N10.103 trillion. All the NSE sectorial indices appreciated: the Bloomberg NSE 30, Bloomberg NSE Consumer Goods, Bloomberg NSE Banking, Bloomberg NSE Insurance, Bloomberg NSE Oil/Gas, and NSE Lotus II appreciated by 2.41 percent (+12.84% ytd), 0.06 percent (+7.285% ytd), 1.41 percent (+15.63% ytd), 1.26 percent (+11.42% ytd), 1.20 percent (+15.75% ytd) and 3.26 percent (+10.81% ytd), respectively.
Amid this trend, analysts at Cowry Asset Management said in their financial markets review and outlook: “In line with our expectation, the equities market saw a mix of bargain hunting and profit-taking activities; however, the bulls carried the day. This week, we anticipate more bargain hunting activities as investors await year-end results and corporate actions of listed companies.”