Profit-taking may linger on stock market

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Nigerian capital market analysts expect cautious stock market trading this week, as the possibility of continued profit-taking cannot be ruled out.

“Investors and traders around the world are concerned about rising inflation and the impending global economic recession,” they wrote, “even as all eyes are on the world and even domestic economic data, while selling sentiments persist across some sectors and funds flow into fixed income instruments from risk-averse investors due to the increase in interest rates and the May inflation rate, which soared to 17.71 percent, an 11-month high since June 2021.”

Analysts’ forecasts
Analysts at Cordros Securities Limited said: “with the significant moderation in the prices of bellwether stocks this week, we expect savvy investors to take advantage of this and make a re-entry into stocks with sound fundamentals and attractive dividend yields.
“However, we do not rule out the possibility of continued profit-taking activities. As a result, we think the local bourse will likely exhibit a choppy pattern. Therefore, we advise investors to take positions in only fundamentally justified stocks.”

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In the new week, analysts at Cowry Assets Management Limited expected to see mixed reactions to the daily change of the local bourse. “Meanwhile, with the expectations of Q2 numbers coming in over the next few weeks we continue to maintain positive sentiments in the market although profit-taking will likely set in as prices rise. Investors are advised to trade on companies’ stocks with good fundamentals and a positive outlook so as to avoid falling into the bear trap,” they said.
While GTI Securities Limited stressed that, “the Nigerian equity market closed last week negative on a four consecutive day’s bearish trend, as investors continue to digest the impact of Fed’s decision on the economy. We expect cautious trading and profit taking to continue in the domestic market.”

Last Week’s Trading Activities

The local bourse was not immune to the rout in global equities, as profit-taking activities dominated trading last week. However, the market opened for four trading days last week as the federal government declared Monday June 13, 2022 as a public holiday to commemorate the 2022 Democracy Day celebration.

Precisely, the All-Share Index declined by 2.68 per cent week-on-week (W-o-W) to close at 51,778.08 points. Similarly, market capitalisation lost N767 billion W-o-W to close at N27.914 trillion. The weekly decline was driven by sell-offs in MTN Nigeria Communications (MTNN), BUA Foods, Airtel Africa and International Breweries.
However, most of the sector gauges tracked closed negative. The NGX Consumer Goods Index, NGX Banking Index, NGX Insurance Index and NGX Oil & Gas indices decreased by 2.98 per cent, 5.20 per cent, 1.21 per cent and 1.80 per cent respectively to close at 639.38 points, 393.72 points, 176.88 points and 542.80 points respectively.

Market breadth for the week was negative as 13 equities appreciated in price, 51 equities depreciated in price, while 92 equities remained unchanged. Learn Africa led the gainers table by 15.74 per cent to close at N2.50, per share. SUNU Assurances Nigeria followed with a gain of 9.37 per cent to close at 35 kobo, while Tripple Gee and Company went up by 9.20 per cent to close to 95 kobo, per share.

On the other side, Livestock Feeds led the decliners table by 16.88 per cent to close at N1.33, per share. International Breweries followed with a loss of 14.97 per cent to close at N6.25, while Cutix declined by 10.74 per cent to close at N2.41, per share.

Overall, a total turnover of 940.892 million shares worth N11.494 billion in 20,077 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 1.831 billion shares valued at N19.494 billion that exchanged hands previous week in 21,723 deals.

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The Financial Services Industry (measured by volume) led the activity chart with 692.325 million shares valued at N6.220 billion traded in 10,615 deals; contributing 73.58 per cent and 54.12 per cent to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 89.872 million shares worth N 246.063 million in 764 deals, while the Consumer Goods Industry traded a turnover of 54.227 million shares worth N1.232 billion in 2,923 deals.

Trading in the top three equities; United Bank for Africa (UBA), Sterling Bank and

Transnational Corporation (Transcorp) accounted for 304.837 million shares worth N1.285 billion in 2,103 deals, contributing 32.39 per cent and 11.18 per cent to the total equity turnover volume and value respectively.

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