.INFLATION

…As profit-taking dominates stock market

By Peter Egwuatu

Despite some impressive half year 2022, H1’22, results’ announcements many investors are still in sell-off mood and cautious, while keeping eyes on macro-economic indicators such as inflation expected to be announced by the National Bureau of Statistics, NBS, this week.

Analysis of the market shows that activities of the bulls resulted to the benchmark index recording declines on four of the five trading sessions of the week.

Precisely, the NGX All-Share Index dipped by 2.1% Week-on-Week, W/W to close at 49,664.07 points. Notably, selloffs in stocks such as MTN Nigeria led to the drop in price by 6.9%; BUA Cement 10.0%; Dangote Cement 2.3% and Stanbic IBTC 9.7%.

Consequently, the Month-to-Date, MtD loss increased to -1.4%, while the Year-to-Date, YtD, gain moderated to 16.3%.

However, activity levels were positive, as trading volume and value increased by 114.1% W/W and 5.4% W/W respectively.

Looking into the new week, analysts at Cowry Asset Research said: “In the week ahead, we believe investors will focus on the outcome of the bond auction scheduled to hold on Monday (today) to gain further clarity on the movement of yields in the Fixed Income, FI market.

‘‘As a result, we envisage cautious buying actions from dividend-yield-seeking investors amid intermittent profit-taking activities. Notwithstanding, we reiterate the need for positioning in only fundamentally sound stocks as the unimpressive macro environment remains a significant headwind for corporate earnings.”

On their part analysts at InvestData Consulting stated: “Continued cautious trading in the face of an inflow of impressive corporate earnings reports and low liquidity, with all eyes on macroeconomic data and developments across the country will continue.

‘‘The ongoing mixed sentiments is due to selloffs, pullbacks and bargain hunters taking advantage of the prevailing relatively low prices of stocks and blue chip companies relative to value.

‘‘This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as seen in the high dividend yields indicating the possibility of a higher payout as a hedge against the soaring inflation, while all eyes are on the July Consumer Price Index report expected next week Monday from the National Bureau of Statistics (NBS).’’

They added: “We expect the mixed trends and sentiments to continue on bargain hunting as players react to the impressive half-year results in expectation of more company’s scorecards, especially from the first-tier banks in the midst of sovereign risks, as all eyes are on interim dividends. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists.”

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