By Emeka Anaeto
With just three trading days to go for 2016 trading year, stocks appeared heading to a positive close, though too late to recover from year-to-date, YtD, losses record in 2016.
After a redish November, Nigerian Stock Exchange, began December on bullish sentiment, spurred by the positive developments in the international oil market. The bull run lasted for nearly three unbroken weeks.
However, the first two trading days of last week saw a bearish note as a result of profit taking in the Oil & Gas, and Banking sectors which had led the bullish sentiment. But this negative turn was quickly reversed on Wednesday as sentiments overturned due to renewed interest on select counters.
At the last trading day before the Christmas holiday, the All Share Index of the domestic bourse appreciated marginally by 8 basis points. As a result, the YTD loss reduced further to -7.5 per cent, down from this year’s high of -11.9 per cent.
Noting the strides in positive sentiments, investment analysts at Cordros Capital Limited, a Lagos based investment house, expects sentiments to remain positive in tomorrow’s deals.
But analysts at Cowry Assets Management Limited, another Lagos based investment house, said ‘‘this week, we expect a mix of bargain hunting and profit taking activities.
The Analysts at Proshares, a Lagos based investment information company, noted that ‘‘as 2016 is moving faster to a close, the fresh optimism witnessed towards investment in equities in the early weeks of December again defied the unimpressive economic outlook and bearish macro-economic fundamentals, just as we had witnessed in Q2’2016- this indicates that market is experiencing early ‘December Effect’ or Santa Claus rally.’’ “They explained that Santa Claus rally is the uptick in stock prices in the month of December, which mostly occur towards the end of the year, in anticipation of better prospects in the New Year.
They also noted the adverse economic fundamentals stating that Nigerian economy is still battling with recession, weak revenue, low economic activities, shortage of foreign exchange and yet to tame growing inflation, which had dampened risk appetite towards investment in equities from June to November as market posted 8.78% loss within this period.
They stated: ‘‘The need for portfolio reshuffling had really engineered the fresh optimism while the December effect had aided the bullish run witnessed so far in the month of December.
‘‘This may see the year 2016 close with a modest loss as YTD loss has already been lowered as at 19th December to 7.18% from 12%.’’
As a result of this, some of weathered blue chips and value stocks have really benefited from steady and consistent bargain hunting, which has placed Month-to-Date, MtD, market performance at 5.33 per cent gain as at December 19 2016, compared to loss positions recorded in most months of the out-going year.
“However, some stocks have been under sell-off pressure as their fundamentals remain unimpressive and battered as a result of the impact of the economic recession, a situation which may eventually stay the overall market end-year figures in negative territory.
“Consequently, The Analysts, noted, ‘‘the market had already gathered momentum significantly as market RSI has jumped from 13.16% to 69.68% (overbought threshold). This suggests market may experience cautious trading (profit-taking) soon.’’
But it also indicated a delicate balance of expectations in the remaining days of the year.
The Analysts, therefore state: ‘‘In building up to year-end bargain hunting, we expect improved oil price at the global market to continue to induce or sustain positive sentiments towards certain sectors (Oil and banking sectors), which also shows it is time to buy into certain stocks.“
‘‘Though, it looks like we have had Santa Claus rally early before the expected period, nevertheless, lot of blue chip stocks are still trading far below their fair value, which means there is possibility that Santa Claus rally or December effects can still push prices further up.
“In tabler presentations here, The Analysts indicated stocks on hunters’ radar as they anticipate Santa Claus Rally to regain momentum after on-going modest price correction.”