After the decline seen in the Nigerian stock market last week, analysts have predicted a better market performance this week.
They said the low-price levels of most stocks were likely to drive demand by investors, while boosting market performance.
The Nigerian Stock Exchange All Share Index declined by 4.39 per cent week-on-week, after paring on four of the five trading days last week to peg the year-to-date return of the index at +2.32 per cent (29,305.40 basis points).
The volume and value of transactions declined by 38.47 per cent and 35.31 per cent week-on-week respectively, while the market recorded 21 gainers and 52 decliners last week.
“We anticipate that trading activities in the coming week might be upbeat, as we expect bargain hunting activities from investors given the relatively low closing prices of some fundamentally justified counters this week,” analysts at Meristem Securities Limited said in a report.
For agriculture stocks, the firm maintained a positive outlook for the sector owing to the potential benefits that might accrue from the current administration’s economic diversification drive. They, however, advised investors to assess the sector’s fundamentals before taking positions.
For banking stocks, they said, “While the sector’s stocks have appreciated quite significantly recently, we are of the opinion that some of the sector equities’ are still under-priced (primarily certain Tier-1 banks), especially when considering the expectations of increased earnings given the institution of the new foreign exchange trading framework.
“Hence, we advise investors to take positions, while taking into cognisance that the anticipated impact on earnings may not be reflected until at least Q3 2016.”
For consumer goods stocks, the analysts advised cautious positioning in only fundamentally justified companies, considering the general market mood towards the consumer goods sector.
Having gained for two consecutive weeks, they anticipate fair levels of profit-taking on some insurance sector counters that recorded substantial gains during the recent two-week rally.
As anticipated, the industrial goods sector, following two consecutive weeks of gains, suffered from the profit-taking activities of investors during the past week. Going forward, the analysts expect continued fluctuations in the sector’s sentiments as investors take positions and profits intermittently.
For oil and gas stocks, they said, “We anticipate bargain hunting activities from investors this week, which we expect should translate to a positive week-on-week performance for the sector.
“We advise investors playing within the services space to make decisions after considering company fundamentals, especially as we move into the next earnings season.”
On what will shape the market this week, analysts at Vetiva Capital Management Limited said, “With the Q2 earnings season drawing nearer, we do not rule out the possibility of investor positioning ahead of these releases this week. That said, we foresee mixed performances across stocks at week open.
“Given the strength of the buying interest observed across the fixed income space through last week, we expect gains to filter into the coming sessions albeit cautiously.”
The Nigerian bourse traded largely bearish last week as investors continued to weigh the fall out of Britain’s decision to leave the European Union.
For fixed income, trading in the Treasury Bills market was largely upbeat last week as the Federation Account Allocation Committee inflows led to improve system liquidity. Notably, yields declined by 186 basis points on average across maturities.
Meanwhile, the bond market wavered between positive and negative territory following the issuance of third quarter bond calendar, which came in slightly higher than the previous quarter (monthly average is scheduled to rise by 9.4 per cent to N117bn). Overall, yields declined 89 basis points on average across maturities.