By Kayode Tokede
The equities market of the Nigerian Stock Exchange (NGX) closed on a weaker position in its week-on-week performance as investors trade with caution.
Specifically, the NGX All-Share Index rose week-on-week (W-o-W) by 22.09 points or 0.06 per cent to close at 38,943.87 points as market capitalisation rose N11 billion W-o-W to close at N20.290 trillion.
Sectoral performance failed to mirror the benchmark index as most indices closed in red. The NSE Banking, NSE Insurance, NSE Consumer Goods, NSE Oil & Gas and the NSE Industrial index fell by 0.79 per cent, 0.58 per cent, 0.21 per cent, 3.35 per cent and 0.24 per cent respectively to close at 370.21 points, 184.02 points, 548.99 points, 358.99 points and 1,954.46 points respectively.
Meanwhile, a total turnover of 856.289 million shares worth N10.752 billion in 15,663 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 1.426 billion shares valued at N13.073 billion that exchanged hands previous week in 19,315 deals.
The Financial Services Industry (measured by volume) led the activity chart with 583.038 million shares valued at N3.971 billion traded in 7,894 deals; contributing 68.09 per cent and 36.93 per cent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 62.961 million shares worth N3.197 billion in 2,579 deals, while ICT Industry traded a turnover of 45.745 million shares worth N1.646 billion in 775 deals.
Trading in the top three equities; Access Bank, Universal Insurance and Wema Bank (measured by volume) accounted for 211.151 million shares worth N789.843 million in 1,403 deals, contributing 24.66 per cent and 7.35 per cent to the total equity turnover volume and value respectively.
On Exchange Traded Products (ETPs) platform, a total of 106,810 units valued at N1.852 million were traded last week in 21 deals compared with a total of 2,016 units valued at N537,038.08 transacted previous week in 10 deals, while on the Bond market, a total of 51,261 units valued at N52.911 million were traded last week in 26 deals compared with a total of 93,019 units valued at N99.809 million transacted previous week in 39 deals.
However, capital market analysts expected the equities market to continue trading in a zigzag (up and down) movement.
Analysts at Afrinvest Limited in its weekly report on the financial market stated that “in the coming week, we expect a mixed performance on the back of extended bargain hunting and weak investor sentiment.”
Also, analysts at Cordros Securities Limited said: “We expect the lull in the local bourse to persist until positive triggers in the form of lower fixed income (FI) yields and improved dollar liquidity spur buying interest from domestic and Foreign portfolio investment (FPI) investors.
“That said, we expect risk-averse investors to recalibrate their portfolio towards fundamentally sound stocks with attractive dividend yields in the week ahead. However, we advise investors to take positions in only fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings.”
In the new week, analysts at Cowry Assets Management Limited expected the equities market index to close in positive territory as investors perceive CBN’s preference for growth as a positive for equities market.
At the end of its 138th bi-monthly Monetary Policy Committee (MPC) last week, the CBN retained all monetary policy parameters at current levels; MPR at 11.5 per cent, Asymmetric Corridor at +100/-700 basis points, liquidity ratio (LR) at 30.0 per cent and Cash Reserve Ratio (CRR) and 27.5 per cent. The Committee noted that the performance of the global economy in the first two quarters of the year 2021 and into the third quarter, remained favourable with positive outlook for the rest of the year.
The MPC outcome on equities, analysts noted that “Despite the broadly decent earnings delivered by companies during the H1, 2021 earnings season, it has failed to inspire strong buying interest from equity investors. Since the last MPC meeting in July, the ASI has recorded a meagre gain of 0.3 per cent as of September 16, 2021.
“In our view, the outcome of the MPC meeting has already been priced. Hence, we expect a neutral reaction from market participants. However, we still see scope for the market to deliver positive returns in Q4, 2021, given that yields will trend southwards; investors positioning in dividend-paying stocks ahead of 2021 full year dividend declarations in Q1, 2022; and increased activities from FPIs supported by improved liquidity conditions in the Investors & Exporters FX window.
The chief operating officer of InvestData Consulting Limited, Ambrose Omordion said that technically, the seesaw movement of the Nigerian Exchange (NGX) index’s action on low traded volume is a concern for technical traders, as players digest the latest inflation data and treasury bill (TB) auction rates in the midst of foreign currency illiquidity ahead of the MPC meeting’s outcome.
Omordion explained further that “Meanwhile, discerning investors and traders continue taking advantage of the market pullbacks to reposition, while many stocks remain undervalued and at the same time trading within their ‘buy’ ranges, a situation expected to attract funds into the equity space given the high dividend yields capable of serving as a hedge against inflation.
“Also, institutional investors and others continue to digest the Q2 GDP growth ahead of more first-tier bank results, as well as the continued repositioning of portfolios for the year’s last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform.
“Last week’s low volume suggests that institutional investors and others are still cautiously looking at the changing trade environment. It is noteworthy that oil prices rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.”
The local stock market index last week turned positive as yields in the fixed income space moderate further as CBN halt increase in rate at the money market. The preference for real sector growth was further emphasized by the just concluded MPC meeting. Hence, the bullish momentum in the equities space.