Analysts predict market recovery after recent selloffs in equities

By Taiye Olayemi

Investment analysts have expressed optimism that the Nigerian stock market will rebound in the weeks following the recent selloff that wiped N5.643 trillion from investors’ wealth.

The analysts, in an interview with the News Agency of Nigeria (NAN) on Sunday, said improving investor sentiment and the expected release of half-year corporate earnings could help stabilise the market after the current correction phase.

The Nigerian Exchange Ltd. (NGX) All-Share Index and market capitalisation declined by 3.59 per cent to close the week at 235,941.27 points and N151.327 trillion respectively.

This compares with 244,738.74 points and N156.970 trillion recorded in the previous week.

Mr Umaru Mathew, Head of Capital Market, Commodities and Dealers at Equity Capital Solutions Ltd., said the market downturn reflected a natural correction after an extended bullish run.

According to him, profit-taking by investors and weaker-than-expected earnings by some banks contributed to the recent decline.

“The market is simply balancing itself. We have seen a period of strong performance, and what is happening now is largely driven by profit-taking activities.

“Many investors had expected the banking sector to deliver exceptionally strong results that would further boost market sentiment.

“However, only a few banks were able to meet those high expectations,” he said.

Mathew said some investors had also shifted funds to the money market, where yields remained attractive and risks comparatively lower.

“The money market is still offering competitive returns, and some investors see it as a safer option.

“Nevertheless, there are still fundamentally sound stocks in the equities market with attractive valuations,” he said.

The analyst said the current weakness should not be attributed solely to the migration to the T+1 settlement cycle, noting that market forces and investor behaviour remained the major drivers of price movements.

He, however, expressed confidence that the market would gradually stabilise.

“For the first one or two trading sessions next week, we may continue to see the same trend. There will still be some pressure on prices as investors continue to take profits.

“However, some stocks have already begun to approach support levels, and we could see renewed buying interest in those counters.

“As we move into July and the half-year earnings season begins, investors will have fresh information to guide their decisions.

“We expect some stocks to find support and gradually recover, while the broader market should become more stable within the next one or two weeks,” he said.

Also, the Managing Director of Globalview Capital Ltd., Mr Aruna Kebira, said investors were repositioning ahead of the proposed Dangote Refinery public offer while rising money market yields had encouraged a shift away from equities.

“Most investors are already making provisions for the Dangote public offer. Many people who need to keep money for the offer are moving funds out of the capital market.

“The money market offers fixed returns on both capital and interest, unlike the capital market where returns are subject to market fluctuations.

“This is encouraging some investors to shift funds from equities,” he said.

Kebira also expressed optimism that the market could rebound once listed companies begin releasing their second-quarter earnings.

Meanwhile, a total turnover of 3.075 billion shares worth N254.614 billion was traded in 287,157 deals during the week.

This contrasts with 4.964 billion shares valued at N207.521 billion exchanged in 235,966 deals in the preceding week.

The Financial Services Industry dominated trading activities with 2.074 billion shares worth N64.490 billion traded in 121,981 deals.

The sector contributed 67.44 per cent and 25.33 per cent to total equity turnover volume and value respectively.

The services industry followed with 175.743 million shares valued at N2.759 billion, while the Consumer Goods Industry recorded 133.375 million shares worth N12.680 billion.

Trading in Access Holdings Plc, Sterling Financial Holdings Company Plc and Jaiz Bank Plc accounted for 819.234 million shares valued at N12.247 billion in 21,809 deals.

The three equities contributed 26.64 per cent and 4.81 per cent to total turnover volume and value respectively.

Market breadth remained negative as only 11 equities appreciated during the week, compared with 40 in the previous week.

Seventy-eight equities depreciated, while 57 equities closed unchanged.

Cornerstone Insurance, Academy Press, Conoil, Neimeth Pharmaceuticals and Ikeja Hotel emerged as the top gainers.

International Energy Insurance, First HoldCo, John Holt, Nigerian Aviation Handling Company and Zichy Agro Industries led the losers’ chart.

Meanwhile, the NGX suspended trading in the shares of Fortis Global Insurance Plc to enable reconciliation of shareholders’ records ahead of the listing of reconstructed shares.

The Exchange said the suspension would also facilitate the determination of shareholders entitled to receive the reconstructed shares.