September 21, 2020

Analysts see bright prospect for equities over low valuations

Analysts see bright prospect for equities over low valuations

By Nkiruka Nnorom 

Investment analysts have said that the domestic bourse would benefit from low equities valuations over the long term, even as the market sustained a mixed performance following sell pressure in banking stocks. 

They hinged their positive expectations on search by investors for better yields opportunities.

The market had recorded mixed trading last week in the absence of any positive catalyst, leading to a marginal decline of 0.08 percent in the benchmark index – the All Share Index (ASI).

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Specifically, the ASI depreciated to 25,572.57 points from 25,591.95 points, indicating 0.08 percent decline.

However, the market capitalisation of all listed equities rose by 0.10 percent to close at N13.565 trillion from N13.351 trillion. 

Performance across the various sectors was mixed with the banking and oil and gas sectors declining by 0.7 percent and 1.0 percent respectively.

On the other hand, the industrial goods (+0.5%), and consumer goods (+0.1%) sectors closed marginally higher, while the Insurance index closed flat.

In their review of the market for the week,   analysts at Cordros Capital, a Lagos-based investment banking firm, affirmed that the market could see a positive performance on the long run over compelling valuations while reiterating calls for cautious buy. 

They stated: “In the absence of a positive catalyst, and given the still uninspiring macro story, we guide investors to trade cautiously in the short term. 

“However, we expect the market might benefit over the longer term on compelling valuations and as investors seek alpha-yielding opportunities in the face of negative real returns in the fixed income market.” 

Analysts at Afrinvest Securities, another Lagos-based investment banking firm, said investors would continue to take profit in the new week, a situation which would always lead to depreciation of the stocks.