Don't Miss

Nigerian stocks offer re-entry opportunity for bargain hunters

By on May 8, 2015

The Nigerian stock market may have witnessed some sort of sell-off recently but it could only be offering another opportunity for bargain hunters to re-enter the market for value stocks that are currently priced below their actual values.

Month-to-Date (Mtd), quarter-to-date (QtD), and Year-to-Date (Ytd) the Nigerian equities market showed positives in term of returns at 9.33 percent, 9.33 percent and 0.15 percent.

With more improved first-quarter (Q1) earnings inciting investors who are willing to take position in some stocks ahead of half year earnings, analysts believe that attractions around some beat-down but promising stocks may prompt another form of rally.

Though, as Nigeria’s near term macroeconomic doubts remains, there is still a cautious approach towards equities at the nation’s bourse; even worse off as currency risk remains – another major factor that is affecting foreign investment inflows into the equities market.

Recall that the stock market opened for four trading days last week as the Federal Government declared Friday, May 1, 2015, a public holiday to mark Workers’ Day celebration.

The NSE All-Share Index (ASI) and market capitalisation appreciated by 0.64 percent and 0.30 percent, respectively, to close last week at 34,708.11 points and N11.787 trillion. Similarly, four indices finished higher during the week with the exception of the NSE Banking, NSE Insurance and NSE Oil and Gas indices that declined by 1.69 percent, 2.34 percent and 6.87 percent, respectively.

“We anticipate sustained bargain hunting activities with possible general price rallies, as investors swoop on recently beat down but promising stocks,” analysts at another Lagos-based investment house, Cowry Asset Management Limited, said.

Also supporting this optimism, market analysts at Access Bank plc said: “Current trend (last week positive close) may be sustained as investors take position ahead of more corporate performance results.”

Meanwhile, a turnover of 1.169 billion shares worth N11.961 billion in 17,769 deals were traded last week by investors on the floor of the Exchange in contrast to a total of 2.064 billion shares valued at N17.179 billion that exchanged hands the preceding week in 25,577 deals.

The Financial Services Industry (measured by volume) led the activity chart with 796.234 million shares valued at N6.200 billion traded in 10,081 deals; thus, contributing 68.13 percent and 51.83 percent to the total equity turnover volume and value, respectively. The Conglomerates Industry followed with a turnover of 239.230 million shares worth N862.503 million in 1,157 deals. The third place was occupied by the Consumer Goods Industry with 46.984 million shares worth N2.435 billion in 2,811 deals.

Trading in the Top Three Equities namely – Transnational Corporation of Nigeria plc, United Bank for Africa plc and Access Bank plc (measured by volume) accounted for 460.340 million shares worth N1.979 billion in 2,903 deals, contributing 39.39 percent and 16.55 percent to the total equity turnover volume and value, respectively.

Investment analysts at Lagos-based United Capital plc said: “This week, we expect investors to react positively to attractive pricing of value stocks as well as recently released Q1-15 numbers of some listed companies.”

According to the analysts, “near term macroeconomic uncertainty will likely sustain the cautious approach towards equities seen today, as currency risk remains and could crystallise. This said, we see the market closing the week with a marginal positive return.”

Despite that equities market kicked-off this week on a negative note, considering last week’s positives, analysts are optimistic of a positive trend this week.


[Business Day]