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Delayed cabinet weighs down equities despite Q2 earnings expectation

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By Nkiruka Nnorom

The delay in announcement of cabinet members may further weigh down equity pricing in the days ahead as stock dealers price in uncertainties in the economy horizon in their equity valuations.

Traditionally, investors and dealers take position on value stocks ahead of each earning season; but this has not been the case so far in the first week of the second quarter 2019, Q2’19, earnings season, as the market went down in all the five trading days last week.

Already many companies have announced their closed period to consider their financial results for the period, which would have prompted value investors to file back into the market, but they seem to still be sitting on the fence.

Consequently, the All Share Index, ASI, went down by 2.32 percent to close at 29,270.95 points at the end of transaction last week.

Similarly, investors lost N304 billion as the market capitalisation of listed equities depreciated to N12.902 trillion from N13.206 trillion, representing 2.30 percent decline.

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In their review of the market, analysts at United Capital Plc, a Lagos-based investment banking firm, said that sentiment would be dividend between investors taking position ahead of Q2 earning season and those awaiting clarity on policy direction of the government. “In the week ahead, we expect sentiments to be caught between, bargain hunters that are taking position ahead of the Q2 earnings season while seeking fundamentally sound stocks trading at cheap valuations, and market pessimists that are awaiting clarity on the polity environment,” they said.

Also, analysts at Vetiva Securities said: “As some listed companies go into their closed period, we believe cautious investor interest will begin to trickle back into the market. We believe our macro fundamentals remain positive, but the lack of policy direction will still weigh on the market. Going into the new week, we expect sideways trading to persist in the market.”

Corroborating them, analysts at Afrinvest Securities, said though Airtel Africa Plc’s listing is expected to drive activity this week, but the bearish run would continue as investors maintain a risk-off approach towards investing in the domestic equities market.

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