Retail investors reduce equity holding to meet season’s obligation
The buy-side of Nigerian stock market is witnessing low patronage as investors increasingly consider offering reasonable percentage of their equity holdings for sale in their newest move to meet this period’s financial obligations.
Though still recovering from the impact of summer expenses on their savings, many retail investors are looking to proceeds from stocks as they prepare their children to return back to school. With this development and analysts’ short-term outlook for equities market, one could explain the direction of the Nigerian stock market in the near-term.
“Given the performance of the equity market has been underwhelming in the past three weeks, we believe there are still opportunities for bargain hunting across sectors. However, the moderation in trading activities in the past weeks suggests appetite may have cooled from the peak of the excitement which trailed the opening of the Investors’ & Exporters’ (I&E) FX window,” said Afrinvest Securities research analysts. They expect the stock market to trade sideways in the short term – pending filings for nine-months 2017 results, “even as we retain our positive view for equities in the medium term.”
“Investors should also take strategic positions in stocks that pay interim dividends. Building materials, food and beverages, agro-allied processing and banking stocks offer attractive returns”, said FSDH Securities research analysts in their recent outlook.
The research analysts at FSDH Securities had expected to see profit-taking on stocks that have recorded strong appreciation in their share price advised investors to maintain a medium-to-long term position in stocks that have good fundamentals.
“Though the interim dividend I got from companies is a big relief, I have asked my stockbroker to reduce my holdings in some stocks. I hope that after this period when the huge financial burden decreases and I will re-enter the market again”, a retail investor said on the side line of discussion with INVESTOR at a recent event. While this investor reconsiders buying penny stocks in the banking sub-sector which she stopped over 5 years ago, she claims to have invested hugely in notable counters at the Exchange.
The Nigerian stock market has impressed investors driven by factors such as: improved second-quarter (Q2) results from quoted companies; the stability in the macroeconomic environment; improved business and consumers’ confidence in the Nigerian economy; and the sustained liquidity in the foreign exchange (FX) market leading to the inflow of foreign investors. Nigeria has exited recession as second-quarter (Q2) 2017 GDP grew by 0.55percent year-on-year (y/y).
Amid all these, research analysts observed lately that the market tilted to negative breadth and dampened sentiment. Though it witnessed a positive week-on-week (w/w) performance of 1.27percent in four-day trading week to September 8 and 33.80percent year-to-date (Ytd) return,
Except for the positive GPD growth rate, but with the half-year (H1) earnings season almost over, research analysts at Lagos-based Vetiva Capital Management expected the market to open this week “mixed albeit with a bearish tilt given notable pressure on large cap stocks.”
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