Analysts call for caution
By Peter Egwuatu
The decision of the Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, on the Monetary Policy Rate, MPR, and more release of companies’ earnings for the first half of 2021 , HI’21, are expected to influence the direction of trading in stocks this week as investors continue to trade cautiously.
The MPC is expected to hold its fourth meeting of the year today and tomorrow to determine whether to hold the monetary policy rate or change it as this has direct impact on the equities market.
Meanwhile, the earnings-induced buying interests continued on the Nigerian Exchange Limited, NGX, last week as scorecards from Total Nigeria and BOC GAS beat market and analysts’ expectations. The two surprised investors with the interim dividends of N4.00 and 50 kobo respectively.
Also, the financial performance were impressive enough to attract immediate positive responses leading to price appreciation during the trading sessions of the week.
Despite the shortened trading week due to the public holidays on Tuesday and Wednesday, the bulls regained dominance of the market.
Also investors flocked the shares of Dangote Cement due to expectation of the second tranche of its share buyback programme. Based on the preceding week, the All-Share Index, ASI, advanced by 1.9 per cent Week-on-Week, WoW to close at 38,667.90 points on Friday.
Accordingly, the Month-to-Date, MtD, gain rose to 2.0 per cent, while the Year-to-Date, YtD, loss moderated to -4.0 per cent.
However, activity levels were weak, as trading volumes and value declined by -11.1 per cent WoW and -52.1 per cent respectively.
Commenting on market situation, analysts at Cordros Capital said: “In the week ahead, we believe investors will be focused on the outcome of the MPC meeting to gain further clarity on the movement of yields in the Fixed Income, FI market. We also expect the NGX floor to be flooded with corporate earnings as more companies publish their unaudited H1’21 numbers, accompanied by dividend declarations. We believe this should provide respite for market performance. Overall, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings for corporate earnings.
On the market outlook, analysts at Investdata Consulting Limited said: ‘‘We expect a mixed trend and performance on profit-taking and accumulation in the midst of rekindled buying interests ahead of more half-year earnings and MPC meeting amid the oscillating volume that suggest that an end is in sight, while smart money takes advantage of market corrections to reposition. It is noteworthy that oil price continues its oscillation at the international market, even as corporate actions and interim dividend possibilities are around the corner.
“We note also that some stocks are trading within their buy ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $69pb to support global economic and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support a global and domestic economic recovery that will enhance the market and give direction.”