Analysts Predict Cautious Trading as Stock Market Decline by N280bn

Kayode Tokede 

The stock market of the Nigerian Exchange Limited (NGX) posted its first weekly decline in February as investors trade with caution over 2023 election uncertainties.

Specifically, the loss recorded on the final trading day, proved sufficient to wipe out the cumulative gains of 0.4 per cent as of Thursday.

Consequently, the NGX All-Share Index shed 0.96 per cent week-on-week (W-o-W) to close at 53,804.46 basis points as investors value, market capitalisation shed N280 billion to close the week at N29.310 trillion.

Across the sectors last week, performance was largely upbeat for most of the indices that saw support from an increased inflow of funds into the equity space and continued buying sentiments, except for the banking index that was hit with profit-taking, which dragged the index into the negative region by 1.34 per cent week on week.

On the contrary, positive price movement was seen in the NGX Insurance index with a weekly gain of 1.18 per cent. NGX Oil & Gas index recorded a weekly gain of 0.91 per cent, NGX Consumer Goods index rose by 0.67 per cent, while NGX Industrial Goods index gained 0.06 per cent for the  week as investors posed their expectations for the early filers from these sectors to start hitting the market with their 2022 full-year scorecards even as the presidential and national assembly elections draw closer.

The market breadth for the week was positive as 36 equities appreciated in price, 24 equities depreciated in price, while 94 equities remained unchanged. Tripple Gee and Company led the gainers table by 45.26 per cent to close at N1.99, per share. Livingtrust Mortgage Bank  followed with a gain of 16.16 per cent to close at N2.30, while Chams Holding Company went up by 16.00 per cent to close to 29 kobo, per share.

On the other side, CWG led the decliners table by 17.35 per cent to close at 81 kobo, per share. Fidelity Bank followed with a loss of 14.70 per cent to close at N4.76, while Pharma-Deko declined by 10.00 per cent to close at N1.89, per share.

Overall, a total turnover of 751.990 million shares worth N20.575 billion in 15,822 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 944.293 million shares valued at N22.710 billion that exchanged hands previous week in 18,615 deals. 

However, capital market analysts, said caution trading is expected on the stock market this week.

They noted that in the face of rising inflation and declining rates and yields in the fixed income market, portfolio reshuffling to hedge against inflation will continue to favour sectors and stocks with high dividend yields and strong earnings to support high payouts.

The market’s upbeat and uptrend nature are expected to be strengthened on the back of corporate actions and earnings of early filers and others in the near term and during post earnings season before the governorship election or after, due to price adjustment for dividend declared.

Analysts at Cordros Securities Limited in a report said “we believe investors will be caught between two opposing forces ranging from uncertainties ahead of the nation’s presidential election and the release of 2022 full year corporate earnings with accompanying dividend declarations.

“Consequently, we expect more of a choppy theme as cautious trading takes center stage ahead of the 2023 general elections scheduled to hold later in the week. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”

Analysts at Cowry Assets Management Limited said “this week, all eyes will be on the early filers with their 2022 full-year scorecards to guide investor activities. This is particularly true for banking stocks and others with strong fundamentals and earnings that support a higher payout or dividend growth, even as the presidential and national assembly elections inch nearer.

“However, a breakout of this oscillating bullish run is expected to be reinforced on the back of corporate actions, increased inflow funds in the equity space, and during the post-earnings season before the governorship election or after, due to a price adjustment for the dividend declared.

However, we advise investors to trade companies with sound fundamentals and, as such, should take advantage of price corrections in line with domestic and global trends.”