BY FESTUS OKOROMADU
Volatile trading month of equities on the Nigerian Exchange Limited in November propelled a 3.08 percent month-on-month (M-o-M) gains, offering December a platform to kick start on a positive note.
At the close of trading on Friday, the benchmark notched 0.27 percent week on week (W-o-W) to close at 71,419.87 points after testing a new level of 71,566.58 basis points on the strength of highly priced stocks and low cap companies hitting new 52-week highs in the face of increasing macroeconomic headwinds, weak economic growth and impressive corporate earnings that had supported prices and buoyed investor confidence in the equity space.
Experts say the positive trading activities recorded last week were due to upbeat momentum in investor’s optimism as they continue taking a bet on Nigerian stocks amidst improved buying interest.
However, the market capitalisation declined by 0.23 percent week on week to N39.08 trillion due to the delisting of UNION BANK PLC from the daily official list of the exchange which resulted in a loss of N90.4 billion.
Nevertheless, strategic moves by investors saw opportunities in low-priced equities on the strength of better-than-expected numbers from these companies and market sentiments with high anticipation of the forthcoming dividend season.
Meanwhile, the year-to-date return of the index inched to an impressive 39.35 percent.
While the overall market performance was positive, detailed analysis indicates a minor setback in the Consumer Goods, Industrial and Insurance indexes as they declined by 0.47 percent, 1.23 percent and 2.03 percent respectively pressured sell-offs across counters such as OMATEK, GUINEAINS, NEIMETH, HONEY FLOUR and RT BRISCOE.
Conversely, the Banking and the Oil & Gas indexes recorded gains of 1.92 percent and 5.97 percent, respectively, propelled by notable price increases in FBNH, SEPLAT, ETI, ACCESSCORP, OANDO and ZENITH.
On the other hand, the level of trading activity witnessed an uptick in the face of slightly positive market breadth as there was a 4.88 percent increase in total traded volume, reaching 2.54 billion units in weekly deals, with the number of trades advancing by 8.75 percent to 36,138.
Also, the weekly traded value experienced an uptick of 70.50 percent, totaling N38.64 billion.
Top performers for the week included MECURE, NNFM, FBNH, SEPLAT and NESTLE, with each securing impressive gains of 41 percent, 25 percent, 11 percent, 10 percent and 10 percent, respectively from their previous week’s close.
Conversely, stocks like DAARCOMM, UNITYBNK, and UBA faced declines in their share prices, experiencing price decreases of -21 percent, -16 percent, and -15 percent, respectively, on a week-on-week basis.
Meanwhile, market experts have forecast cautious activity this new week.
For instance, researchers at Cordos Securities Limited opined that given what they call the lack of notable positive catalysts to stimulate sentiments, they expect cautious trading to persist in the market this week.
Nevertheless, they stressed the need for investors to seek positions in only fundamentally justified stocks, insisting that the weak macro environment remains a significant headwind for corporate earnings.
But for researchers at Cowry Assets Limited, the new week promises a dynamic and multifaceted landscape for investors to navigate.
“We anticipate profit-taking and corrections after the recent market surge, potentially fortifying future upside potential. This is expected as investors assess global events, fixed income yields, and CBN policies. Earnings reports will be closely watched, acting as barometers for economic health and sector-specific performance. Economic data, encompassing inflation, employment, and GDP growth, will significantly influence market sentiment and stability,” they stated.
According to the Cowry researchers, the CBN’s policy decisions on interest rates are poised to be key determinants in shaping market dynamics.
They added that global geopolitical factors and trade relations will play a crucial role in investors’ risk assessments and decision-making.
Portfolio adjustments are likely as market participants strategically position themselves amid December trends and potential financial market resets.
But like their colleagues, they equally advised investors to look out for stocks with sound fundamentals to invest in.
“Amidst all these, we maintain our advice to investors on taking positions in stocks with sound fundamentals and whose earnings yield and earnings per share support higher payout ratio,” they stated in their weekly market report.
