THE bullish trend which persisted for five consecutive weeks was bucked last week as a combination of profit taking and portfolio rebalancing dragged market performance southwards.

But a major factor which influenced the reversal of the bull run was the body language of the Central Bank of Nigeria, CBN, on its impending flexible foreign exchange. The apex bank had announced two weeks ago that it was modifying the exchange policy which had hampered the stock market performance and the market followed the announcement to further launch into renewed bull run which wiped out the year-to-date, YTD, loss position launching it into positive .

However, CBN’s delayed announcement of the guide line for the proposed flexible foreign exchange market regime disappointed investors who are now wondering if the policy would be as favourable as speculated.
Consequently, All Share Index depreciated 4.4% week-on-week, W-o-W, to close at 27,634.48 points, dragging YTD performance back into the negative region of -3.5%.

Looking ahead, analysts at Cowry Asset Management Limited, a Lagos based investment house, said, ‘’we expect bargain hunting activities for value stocks. However, we advise caution amid uncertainties over government’s intended foreign exchange supply model’’.

On its part, analysts at Afrinvest West Africa, another investment house in Lagos, said ‘’outlook for the week is expected to be soft as the market continues to anticipate clarity from the CBN on the new exchange rate regime which was proposed to be announced after the May Monetary Policy Committee, MPC, meeting.

‘’Thus, market activities will be largely driven by speculation as investors bet on stocks with attractive short term upside  amid weakening macroeconomic indicators and hazy outlook. We advise investors to trade cautiously and take position in fundamentally sound stocks’’.

Investor sentiment appeared watered during the first trading session of this week as market breadth (advancers’/decliners’ ratio) closed at 0.7x – from 1.8x on Friday- as a result of 16 advancing stocks against 24 declining stocks.

Analysts at Meristem Securities Limited attributed the losses recorded yesterday to ‘’a rebirth of negative sentiments from investors, following the gains accumulated during bargain hunting activities of the last two trading sessions’’. Looking at the week ahead they stated ‘’we anticipate a negative close to the week at the Nigerian bourse, as profit taking activities are expected to overshadow bargain hunting actions baring substantial market moving news inflow’’.