Analysts see upside potentials as market creates attractive entry opportunities
While many stock investors wonder if there is still any room for upside in this second-quarter (Q2) 2018, analysts say the recent dip seen in the market creates attractive entry opportunities in value stocks.
The Nigerian Stock Exchange (NSE) All-Share Index (ASI) depreciated by 1.60percent last week to 40,841.14 points while and Market Capitalisation declined to N14.753 trillion.
While stock investors showed less interest in equities, only 19 equities appreciated in price in the trading week ended April 6, lower than 40 in the preceding week; 53 equities depreciated in price, higher than 40 equities in the preceding week, while 99 equities remained unchanged, higher than 91 equities recorded in the preceding week.
Though the market opened this week on a negative note after a record N150billion loss on Monday, Afrinvest research analysts maintain their positive near-term outlook as investors hunt for bargain opportunities.
“We believe the current negative performance of the market is a correction to the bullish run witnessed in the first two months of the year. The weak sentiment also reflects some negative earnings surprises in the earnings season as well as slowdown in portfolio flows into the equity market,” the analysts said.
They further noted that the extended selloff “has, however, created attractive entry opportunities in large and medium cap stocks with strong fundamentals”.
The local equities market in the trading week to April 6 extended the 3-week consecutive downtrend as the All Share Index declined 1.6perxcent week-on-week (WoW) to 40,841.14 points while year-to-date (YtD) returns moderated to 6.8percent.
GTI research analysts in their outlook for the month of April 2018 expect positive economic environment to dictate major activities in the month.
GTI expects a positive market bearing in this month. In the meantime, they strongly advise investors to take a keen interest on firms’ fundamentals before taking an investment position on such firms.
“We expect to see a lower reading for March inflation, an improved first-quarter (Q1) GDP and improved March PMI (already released). These are expected to have a positive impact on Q1 earnings releases. This would likely buoyed market reprising considering that we have witnessed extended oversold of main indicators as a results of recent market correction and significant profit taking,” according to GTI research analysts.
For United Capital, they believe there is still room for further upside “given that the benchmark index currently trades below our base case return of 12.4percent for the year.”
“Sentiments will be largely driven by first-half (H1) 2018 earnings scorecards, continued improvement in the broader economy and a lower yield environment,” United Capital analysts added in their most recent daily insight.
On the outlook for equities in second-quarter (Q2) 2018, United Capital said “2018 started out on a bullish note, extending the prior year’s bullish sentiments amid optimism in the broader economy and strong full year (FY) 2017 earnings expectation.”
“The NSEASI recorded a massive 16percent return in January 2018 alone but corrected 2.3percent month-on-month (m/m) and 4.2percent m/m in February 2018 and March 2018 notwithstanding the sustained improvement in the broader economy. The FY-17 corporate scorecards also impressed. Overall, the NSEASI rallied 8.5percent quarter-on-quarter (q/q) in Q1-18, spurred by the January rally,” United Capital stated.
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