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Equities’ return to bearish mood to linger much longer

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By Nkiruka Nnorom

INVESTMENT bankers and other operators in the capital market have said that equities’ return to the negative territory will last a bit longer, owing to the absence of another catalyst to spur activity in the market.

They hinted that  the expectations around the policies, programmes and permutations outlook for the next cabinet of the federal government as well as a possible delay in cabinet formation by the President would guide sentiments, not just in the economy, but in the stock market.

The floor of Stock exchange

After enjoying two weeks of euphoria over the listing of MTN Nigeria Communications Plc, the stock market resumed downward trajectory, resulting in 2.1 percent decline in the All Share Index, ASI, last week.

Specifically, the benchmark index halted its two weeks bullish run following losses on all three trading days last week with the All Share Index falling by 2.1 percent to settle at 30,432.13 points.

Also, the market capitalisation of all listed equities declined by N283.2 billion to close at N13.402 trillion, thereby worsening the year-to-date loss to -3.2 percent from -1.1 percent recorded in the previous week.

In their projections, analysts at Afrinvest Securities, said although bargain hunting is expected on stocks, which have recently suffered losses, but sentiment would remain bearish in the absence of any major market catalyst.

Concurring, analysts at Cowry Asset Management, said: “In the new week, in the absence of major stimuli, we expect sustained bearish pressure on the local equities market as investor apathy pervades the bourse, resulting in general sell offs amid flight to safety.

According to United Capital Plc in its weekly research report, “Ex-MTNN, the rally observed in the week prior to the inauguration of the new administration seemed driven by a pre-inauguration euphoria which vanished in the trading days after May 29th. Accordingly, we expect the market to close sideways going forward.”

Meanwhile, analysis of trading activities across sectors showed that performance was bearish as all the five sectors recorded decline. The oil and gas sector led the losers as it declined by 5.1 percent following selloffs in  Japaul Oil and Maritime Services  by  10.7 percent and Total Nigeria Plc (-7.4%), while the insurance and industrial goods sectors declined by four percent and 3.1 percent respectively on the back of losses in NEM Insurance Plc (-13.1%), Law Union & Rock Insurance Plc (-4.2%) and Dangote Cement Plc  (-5.3%).

The banking sector depreciated by 1.3 percent following selloffs in Guaranty Trust Bank Plc  (-3.8%) and Wema Bank Plc (-3.1%), while the consumer goods sector shed 1.2 percent as a result of losses in Dangote Sugar Refinery Plc (-12.9%) and P Z Cusson Nigeria Plc (-9.3%).


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