Investor

Uncertainty trails market direction ahead corporate actions

by Editor

March 14, 2013 | 12:45 pm
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The direction of Nigerian Stock Market (NSE) this week still remains murky as analysts and market watchers appear to vary in their outlook this week.

While most analysts are still bullish in this market that lost a huge N106 billion from capitalisation of the main board equities last week, other schools of thought within the same market believe that investors should approach the market cautiously.

On the floor of the NSE a turnover of 1.928 billion shares worth N20.990 billion in 28,832 deals in contrast with a total of 2.280 billion shares valued at N24.633 billion that exchanged hands the preceding week in 28,170 deals.

For most market participants, their optimism is linked to earlier expectations that as early-bird companies release their full-year 2012 financials from this week, corporate actions in form of dividend payment and bonuses would be a major boost in favour of equities in the short term.

While others fear result from anticipation of repeat of last week scenario where market participants took advantage of high valuations placed on stocks to make short-term gains – a development that resulted to supply side outpacing the demand side at the nation’s bourse.

Though, the market took off this week on a positive, but our trend watch showed that as stock investors failed to take inspiration from a broader risk-on sentiment, Nigerian stock futures depreciated by 334.09 points or 1.01 percent and closed last Friday at 32,849.11 points, evidenced in the NSE All-Share Index. Though still positive, the market’s yield-to-date declined to 16.99 percent.

Analysts at FSDH Merchant Bank Limited noted that the equities market dropped last week due to continued profit taking by investors.

The analysts added that this week, “the market may take a turn as investors take position ahead of the release of the year-end results and corporate actions of some select stocks such as Access Bank, Unilever, Okomu Oil, FBN Holdings, Zenith Bank, ETI, Lafarge WAPCO, among others.”

They also advised investors to consider investment opportunities in stocks that have good fundamentals that can generate good returns in the medium to long- term.

“This week, while market direction remains quite uncertain, we expect investors to take position in stocks with strong market fundamentals,” Tony Monye-lead team of Access Bank plc economic intelligence, says.

“The bear run at the equities market continued last week as investors maintained profit-taking activities. Transacted volumes and naira votes decreased by 15.44 percent and 14.79 percent to 1.93 billion shares and N20.98 billion, respectively. This week, we expect some blue-chip companies to publish their 2012 audited accounts, hence we anticipate bargain hunting activities as investors scramble for corporate actions,” say analysts at Cowry Asset Management.

According to Financial Derivatives analysts, “We remain on the cautious line although we overweight banking stocks. “Equity market gained 3.84 percent in February, bringing the ytd gain to 17.79 percent. Market reached a multi-year high of 33,895.07 points before retreating to close on 33,075.14 points for the month. Results released in February was more of a damper than a stimulant for the market.

“Building materials companies should also deliver strong results. Building materials sector efficient financing strategy should shield them from the high interest expense affecting the manufacturing sector. We believe banks will maintain their FY’11 pay-out ratio, which will give dividend yields greater than 5 percent. Declining yields in the bond market also make equities a long-term favourite. Most bonds are now trading at a premium. The index is likely to remain flat in March after volatile trading and early losses.”

In their outlook for the market tagged “Buying on the rumour and selling on the news,” analysts at Financial Derivatives also add: “The index has performed well so far this year, but is slowing. We called for a cautious strategy in February and were not surprised by the 3.8 percent return.

“The stock market has lost 0.88 percent in March after the January rally and February bull run. This trend is consistent with most other markets. The Dow Jones is at its highest level ever at 14,253.77. Market ytd shows Dow Jones (8.77%); FTSE (100 9.06%); Argentina MERVAL (11.87%); South Africa (JSE AS 3.30%), and Kenya NSE ASI (13.95%),” they analysts say.

Analysts at Partnership Investment Company say: “The bout of profit-taking may give way to some level of bargain hunting. We anticipate sustained mixed sentiment and speculative trading as investors maintain a cautious approach. We advise investors to take advantage of the new price discovery on the back of recent correction cycle to seek value stocks.

“Investors may consider funds allocation in favour of equities market in their portfolio mix to take advantage of anticipated mild rally in the days ahead. Market enthusiasm remains upbeat.”

 

Stories by IHEANYI NWACHUKWU


by Editor

March 14, 2013 | 12:45 pm
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