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Equities market mood likely to remain calm — Analysts

By on October 9, 2014

Capital markets analysts have said although gains are expected intermittently in the coming weeks, investors are likely going to remain cautious.

Analysts at Meristem Securities Limited in their investment guide for the week said the equities outlook remained dreary.

They said, “We are of the opinion that, notwithstanding pockets of positive returns which we expect will be witnessed intermittently, the general market mood will likely remain calm. We continue to extol the virtue of holding certain stocks which we forecast will return positive despite weak general market sentiments.”

On the performance of the stock market last week, they observed that with only four trading days in the week the market traded in both directions, as two days finished positive and negative, respectively. Wednesday, October 1, had been declared a public holiday to mark the country’s independence anniversary.

“However, the market still closed the week positive, as the index finished 0.70 per cent higher week-on-week to bring the Year-to-Date return to -0.55 per cent,” the analysts observed, adding that market returns for the week were driven majorly by the banking and conglomerates sectors, which gained 1.82 per cent and 0.88 per cent, respectively.

The Nigerian Stock Exchange All Share Index and market capitalisation had closed the week at 41,103.94 and N13.572tn, respectively with Ikeja Hotel Plc, Champion Breweries Plc, Cement Company of Northern Nigeria Plc and Stanbic IBTC Holdings the top gainers for the week.

On the other hand RT Briscoe Plc, May and Baker Nigeria Plc, Vono Products Plc, Academy Press Plc and Costain (West Africa) Plc emerging as the top losers.

In their sectoral review, the Meristem analysts observed that the week was largely positive for banking stocks as 12 stocks gained against two decliners while Unity Bank Plc stayed flat.

Despite the weekly gains, they said, “The sector remains beset with challenges from issues including the introduction of Basel II, to the evenly probable policy revision of Cash Reserve Requirement (private or public) which might arise due to the need of the Central Bank of Nigeria to mop up the excess liquidity in the system (exacerbated by the impending Asset Management Company of Nigeria maturities worth approximately NGN1trn expected in December 2014).”

According to them, investors are pricing in these risks, which is causing a drag on the sector’s performance.

“We expect that these risks will continue to drag sector performance though we expect certain stocks to be boosted by positive Q3:2014 numbers,” they added.

In the oil and gas sector, which declined marginally by 0.07 with its year-to-date return at 24.56 per cent, maintained a positive outlook on Oando Plc and Total Plc, while noting that Conoil Plc was fairly valued.

The analysts said they anticipated a better outing for the industrial sector, which closed September and last week on a negative note, as Q3: 2014 earnings releases starts trickling in.

Of the agriculture sector they said, “While we expect the Q3:2014 results to start trickling in soon possibly impacting valuations, we reiterate our position that Okomu Oil Plc, Presco Plc and Livestock Feeds Plc are fairly valued at N32.40, N29.90 and N1.73, respectively.”

 

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