Nigerian equities market bows to sell pressure after six weeks bullish run

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AFTER six consecutive weeks of positive momentum, the equities markets bullish streak at the Nigerian Exchange Limited (NGX) local stock market came to a pause as the benchmark index experienced a 0.93 percent decline week-on-week (WoW), closing at 64,721.09 basis points.

Last week, Nigerian stocks closed in the bear territory following profit-taking activities on all trading sessions in the week, save for Friday when the benchmark index appreciated by 0.4 percent.

The dip was attributed to sell-offs and profit booking in high-priced and blue-chip stocks. The cautious sentiment, according to analyst from Cowry Asset, was driven by investors adopting a “wait-and-see” approach, analysing the recently released July Consumer Price Index (CPI) of 24.08 percent and its potential impact on market instruments.

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Consequently, the decline last week translated to N150.14 billion in losses for equities investors at the local bourse as the market capitalisation of listed equities also witnessed a marginal 0.42 percent reduction WoW, settling at N35.42 trillion compared to the previous week’s N35.57 trillion.

However, the Year-to-Date return of the All-Share Index (ASI) remained at an impressive 26.28 percent, while the Month-to-Date return dipped to 0.6 percent, highlighting the Nigerian market’s resilience amid global uncertainties.

Sector-wise, the Consumer Goods and Industrial Goods sectors were notable gainers, posting week-on-week increases of 2.39 percent and 0.37 percent respectively. Key stocks like Transnational Corporation, Dangote Sugar, CWG, Cutix and Dangote Cement contributed to these sectors’ gains.

Conversely, the Insurance, Banking, and Oil and Gas sectors experienced declines of 2.17 percent, 2.06 percent and 0.42 percent, respectively.

These sectors were impacted by cautious investor sentiment and sell-offs in select mid and high cap stocks such as Access Holdings, Unity Bank, Lasaco Insurance and Eterna Oil, as investors meticulously evaluated the interplay of market and economic conditions.

Trading activity at the local bourse, however, remained subdued with low volumes and a bearish undertone as weekly deals decreased by 3.83 percent to 29,477 deals. The average traded volume decreased by 2.98 percent to 1.69 billion units, while the weekly average value increased by 13.60 percent to N21.97 billion compared to the previous week’s N19.34 billion.

The financial services industry, measured by volume, led the activity chart with 1.166 billion shares valued at N16.925 billion traded in 13,819 deals, thus, contributing 69.04 percent and 57.55 percent to the total equity turnover volume and value, respectively. The Conglomerates Industry followed with 191.320 million shares worth N843.336 million in 1,829 deals. The third place was the oil and gas industry, with a turnover of 64.352 million shares worth N810.637 million in 2,159 deals.

Measured by volume, FBN Holdings Plc, Transnational Corporation Plc and Fidelity Bank Plc traded in the top three equities during the week under review. They accounted for 576.688 million shares worth N6.911 billion in 3,524 deals, contributing 34.14 percent and 23.50 percent to the total equity turnover volume and value, respectively.

During the week, 29 equities appreciated in price lower than 41 equities in the previous week. 56 equities depreciated in price higher than 44 in the previous week, while 70 equities remained unchanged, same as 70 recorded in the previous week.

Amid the negative market breadth, certain stocks stood out. Linkage Assurance, Cornerstone Insurance and Wema Bank emerged as the top performers of the week, drawing the interest of investors, leading to 18 percent, 10 percent and eight percent appreciation in their respective share value.

Conversely, NEM Insurance, Unity Bank and Eterna Oil faced declines due to unfavourable price movements, shedding 10 percent, 10 percent and nine percent from their respective share prices.

In summary, last week’s market activity reflected a delicate balance between cautious optimism and potential challenges in the investment landscape.

Looking ahead to the upcoming week, analysts believe the equity market’s trajectory will unfold at the nexus of nuanced factors, encompassing not only bargain hunting and macroeconomic data assimilation but also ministerial portfolio allocation, FX market dynamics propelled by the infusion of a $3 billion cash loan and the impending earnings releases from prominent tier-1 banks.

“Amidst this tapestry, a feeling of careful optimism rules as market stakeholders navigate the intricate curves to take advantage of evolving opportunities within a dynamic investment landscape. Meanwhile, we continue to advise investors on taking positions in stocks with sound fundamentals,” Cowry Asset Weekly report said.

Analyst at Cordros, however, expect market performance to stay mixed in the week ahead as investors rebalance their portfolios following an assessment of corporate earnings released thus far for H1-23.

“In the medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income market. Overall, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.”