Cautious optimism as general elections draw closer; oil prices decline; volatile forex market, and conservative outlook for impressive full-year 2014 earnings are some critical factors affecting investor sentiments at the Nigerian Stock Exchange (NSE).
Before now, most investors opted for investment in fixed income assets, cash or forex over equities, a move that highlighted the extent of risk averseness of investors.
The stock market gained about N240 billion last week as equity buyers turned the tide and took further position in value stocks ahead of expected releases of full-year 2014 corporate earnings.
Though after a mild profit taking, the value of equities rose last week from N9.804 trillion to N10.044 trillion, while the NSE All Share Index (ASI) rose from 29,383.93 points to 30,103.81 points, indicating an increase of 719.88 points or 2.45 percent week-on-week (WoW).
Summary of stock price changes showed 44 equities appreciated in price, higher than 40 equities in the preceding trading week. Twenty-one (21) equities depreciated in price, lower than 26 equities in the preceding week, while one hundred and 131 equities remained unchanged higher than one 130 equities recorded in the preceding week.
Amid another positive take-off this week at the Nigerian bourse, as investors keenly buy stocks ahead of the release of full-year 2014 earnings by listed companies, the stock market may experience some level of profit-taking as speculative buyers routed to take positions in companies with history of corporate rewards.
Already, most market analysts’ sentiments point in this direction. “We expect an overweight of profit-taking by some speculative investors as short-term trading currently pervade the Nigerian bourse,” said analysts at Lagos-based investment house, Cowry Asset Management Limited.
“The outcome will be a major determinant of the direction for the country‘s economy and the stock market, as this may lead to key policy adjustments.
“While we expect the drags in the market to guide cautious investment this week, we still expect to see position taking in the equities market. Therefore, we see the market closing the week marginally positive,” said investment analysts at Lagos-based United Capital plc.
“On the stock market, the outlook on the banking stocks is bleaker than before in the short to medium term, the effect of this will be a negative sentiment by investors in banking stocks as we do not expect any surprises in FY’14” and Q1’15,” according to market analysts at Capital Bancorp plc.
“Owing to the fact the banking stocks account for more than 25 percent of the equities, we expect to continue to see a ripple effect on other stocks and the NSE All Share Index. Furthermore, the consumer goods companies who rely majorly on imports for their production will be hit by the continued devaluation of the naira as cost of importation will remain high. This will further hamper the outlook in this space with an attendant negative impact on the equities market,” the analysts further stated in their recent financial market review and outlook 2015.
“While continued stability in oil price and some lucidity on currency front present a case for further market recovery, All Share Index may trend southwards as investors take profit following last week’s gains,” said market analysts at Access Bank plc.
“Looking at the prospects of both the global economy and the domestic economy, there is every reason to believe that the equities market will struggle again to perform this year. At current levels, the market appears to be in the oversold region due to the indiscriminate nature of the sell-offs. Overall, while the Nigerian stock market is still promising, we see the first half of 2015 in the negative region but the market may improve in the second half of 2015, provided all other macroeconomic variables remain positive. Notwithstanding, stocks with fundamentals are projected to perform better in the year,” Capital Bancorp analysts said.
Iheanyi Nwachukwu
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