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NSE Roundup! Equities open on cautious optimism

NSE LIVE! Inflation, low corporate earnings drag equities down

Nigerian stock market will reopen its trading floors today amidst lurking selling pressure from profit-taking transactions and expected renewed bargain-hunting as investors expect corporate earnings to trickle in the next few days. Nigerian equities lost N142 billion last week, equivalent to a week-on-week decline of 1.73 per cent.

The benchmark index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), indicated average weekly decline of 1.73 per cent to close at 23,501.87 points as against its opening index of 23,916.15 points. Aggregate market value of all quoted companies on the NSE opens today at N8.083 trillion, compared with N8.225 trillion recorded as the opening value for last week.

With four negative closing out of the five trading sessions last week, the negative average year-to-date return at the stock market built up to -17.95 per cent; implying that on the average, investors have lost nearly one-fifth of their portfolios so far this year.

The selling pressure appeared to be more on the large-cap stocks, which are widely regarded as the most liquid and easily disposable assets. With investors’ apathy making the sale of low-priced, less liquid stocks difficult, investors are increasingly resorting to selling from the top of the portfolio.

Key indices trailing large-cap stocks showed that highly capitalised stocks recorded worse performance than the overall market average last week. This underlined the fact that the negative overall market position is being orchestrated by selling pressure on the large-cap stocks.

Read also: NSE LIVE! Equities remain low as profit-taking continues

The NSE Premium Index- which tracks Dangote Cement, the largest company on the stock market, alongside two leading banks- FBN Holdings and Zenith Bank International, recorded a weekly decline of 2.57 per cent last week. This pushed the index’s average year-to-date return to -24.38 per cent, the highest by any group. The NSE Consumer Goods Index, which tracks the leading fast moving consumer goods companies including stock market’s highest-priced stock-Nestle Nigeria, dropped by 3.17 per cent last week, pushing its average year-to-date return above average at -19.45 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies, returned -1.83 per cent last week and currently has a year-to-date return of -18.08 per cent. Also, the NSE Industrial Good Index, which also includes Dangote Cement and other leading cement and building materials stocks, fell faster than the average with a weekly return of -2.06 per cent and year-to-date return of -21.47 per cent.

Total turnover last week stood at 5.087 billion shares worth N18.487 billion in 16,711 deals as against a total of 1.133 billion shares valued at N9.463 billion traded in 16,680 deals in the previous week. Wema Bank was the main driver behind the turnover volume. A total of 3.59 billion ordinary shares of 50 kobo each of Wema Bank valued at N3.47 billion was traded in 85 deals last week, the largest by any quoted company during the period. Wema Bank alone accounted for 70.6 per cent of total turnover volume. Wema Bank’s financial services sector accounted for 4.9 billion shares valued at N11.4 billion in 9,840 deals; representing 96.25 per cent and 61.64 per cent of the total equity turnover volume and value respectively.

Market analysts expect that more quoted companies will release their audited annual reports and dividend recommendations and the flow will pick up gradually towards the end of this month and next month. The annual reports and dividend recommendations are expected to modulate the market performance. In the absence of corporate earnings and corporate actions that could quicken investors’ appetite, the market had been driven mostly by the foreign exchange-induced slowdown in foreign portfolio investment (FPI) inflows.

A report by the National Bureau of Statistics (NBS) on Nigerian Capital Importation for 2015 showed that foreign portfolio investment (FPI) accounted for 62.3 per cent of total capital imported while other investments and foreign direct investment (FDI) accounted for 22.7 per cent and 15.0 per cent respectively. Total capital inflows declined by 53.8 per cent S$9.6bn in 2015 from $20.8bn in 2014.

Analysts remain cautious about the market outlook in spite of the expected corporate earnings and dividends. Analysts at Afrinvest Securities said the short-term outlook for the market remains negative. “In light of the diminishing investors’ confidence, our short term outlook remains bearish though we believe that market performance in the interim will be driven by investors’ reaction to corporate earnings releases,” Afrinvest Securities stated.

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