February 13, 2023

Expect repositioning, profit taking in stocks – Analysts

Stocks gain as data shows lower new coronavirus cases

Nigerian Stock Exchange

By Peter Egwuatu

Mixed sentiments characterised the equities market last week as it closed marginally higher despite profit booking ahead of next week’s macroeconomic data from the National Bureau of Statistics, NBS, and corporate earnings reports hitting the market.

This is coming in the midst of volatility and increasing electioneering activities as Nigerian voter’s countdown to February 25 for presidential and national assembly election.

Analysis of trading last week showed that the benchmark index, Nigerian Exchange Limited, NGX All Share Index, ASI closed marginally higher by 0.21% Week-on-Week, W/W to 54,327.30 points from 54,213.09 points penultimate week.

The Month-to-Date, MtD and Year-to-Date, YtD returns increased to 2.0% and 6.0%, respectively.

However, activity levels were lower as the trading volume and value declined by 75.2% and 17.8% W/W, respectively. Sectoral performance was largely negative following losses in the Insurance Index by 3.3%, Banking Index 0.9% and Consumer Goods Index 0.6%. On the flip side, the Oil and Gas Index went up by 0.6% and Industrial Goods Index 0.6%.

Commenting on market outlook, analysts at InvestData Consulting stated: “We expect positive sentiments and trend to continue on positioning and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and outcome of Nigeria Treasury Bill, NTB, auction, as rates fell further, amidst the release of more audited earnings and anxiety over the election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”

In their comments analysts at Cordros Research said: “In the subsequent weeks, we expect the NGX to be flooded with corporate earnings as more companies publish 2022 full year numbers, which will be accompanied by dividend declarations.

”We believe this should provide a catalyst for buying activities even as risk-averse investors are likely to remain cautious due to medium-term expectations of an uptick in Fixed Income, FI yields.

”Overall, we advise investors to seek trading opportunities in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”