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Equities pricing: MPC meeting, year-end positioning to renew bullish run

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As UBA, Dangote, others bow to profit taking

By Nkiruka Nnorom

After the profit taking that resulted in 2.6 percent decline in the equities market last week, investment analysts have said that in the current week the market will return bullish at the backdrop of the Central Bank of Nigeria’s Monetary Policy Committee (MPC)  meeting hold today and tomorrow.

The last MPC meeting had taken decisions that spurred the market to all year high in the last two months, and investors may be speculating that the current meeting will retain the decisions.

Also fund managers and other investors are said to be positioning ahead of release of 2020 full year financial results. The third  quarter results so far released have indicated significant level of corporate resilience which would turn out profitable and dividend yielding in the full year results.

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Following several weeks of rising prices, investors moved to take profits pushing activities southwards in three of the five trading days.

Consequently, the benchmark index, All Share Index (ASI), fell by 2.56 percent to settle at 34,136.82 points on account of sell-down in UBA (-10.9%), Dangote Sugar Refinery (-7.7%), Flour Mills of Nigeria Plc (-7.4%), Stanbic IBTC Holdings Plc (-6.5%), Zenith Bank Plc (-5.7%), and Dangote Cement Plc (-3.4%).

In the same vein, the market capitalisation of all listed equities depreciated by 2.56 percent to close at N17.838 trillion from N18.308 trillion in the previous week. However,  activity level was mixed, as volume grew strongly by 153.8 percent week-on-week (w/w) while value declined 38.7 percent w/w to 11.400 billion units and N35.892 billion respectively.

Performance across sectors was all broadly negative with the exception of the insurance sector that rose by 0.5 percent. On the other hand, the banking sector led the losers,  declining by six percent. The oil and gas sector (-4.4%), consumer goods sector (-4.3%), and the industrial goods sector  (-0.7%) all closed in the red.

In his projections, Victor Chiazor,  Managing Director/CEO, FSL Securities, said investors are most likely to return to the market this week after the market went through a series of price corrections.

“We expect the market to also react to the CBN’s last MPC meeting which should hold this week and also expect fund managers to begin to positon their books ahead of the year end.

“For us, we expect the market to be more bullish in the next few weeks as investor increase their search for alpha returns giving the rediculously low interest rate in the fixed income space,” he said.

Analysts in Cordros Capital, said: “We still see scope for expansion in valuation multiples as the depressed yield environment remains compelling for yield-seeking investors to rebalance their portfolio towards equities.

“We expect a mixed market performance due to continued profit-taking activities and positioning by early birds in dividend-paying stocks ahead of  full year 2020 dividend declarations.”

Vanguard News Nigeria 

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