Analysts project reversal in H2
By Nkiruka Nnorom
THE Nigerian stock market has closed the first half 2021, H1’21, negative leading to N1.29 trillion losses to the investors during the period.
The negative development followed the uptick in yields in the Fixed Income (FI) market which resulted in reallocation of assets from equities to FI during the period.
As a result, the benchmark All Share Index (ASI) dropped by 5.87 percent to 37,907.28 points from 40,270.72 points, the opening position in the first trading day of January 2021.
Similarly, the market capitalisation of all listed equities fell by 6.16 percent to close at N19.760 trillion from N21.057 trillion at the beginning of the year.
Recall that the positive sentiment that pervaded the market in H2’20 extended into the early part of the year, but was short-lived due to the reversal in the yields on fixed income instruments, which dampened appetite for stocks.
Meanwhile, investment analysts have forecasted a return to the positive market sentiment in the second half (H2’21) of the year expecting a downward trend in returns on FI assets and investors’ positioning on interim dividend paying stocks.
On the outlook for the rest of the year, analysts at Cordros Capital, a Lagos based investment house, stated: “Despite the yield retracement in the fixed income market, we do not think investors should give up on the possibility of a market rally in the second half of the year as we still see scope for positive market performance.
“Our view is underpinned by prospects of improved macroeconomic conditions which will enhance corporate earnings, the possible return of FPIs, who have been net sellers of Nigerian equities thus far, interim dividends that accompany the Q2 earnings season, and stock-specific events such as GTB’s implementation of a holding company structure and the likelihood of a second tranche of share buyback by Dangote Cement.
“Given that the second half of the year is associated with the declaration of interim dividends, we envisage that investors will flock into stocks with attractive dividend yields as we inch closer to the half-year earnings season.
“We believe “early bird” investors will outperform the “late comers” in H2-21 since they are more likely to reap the benefits of a divided rush.”