Stocks Losses Widen as Investors Baptise NGX with Selling Rallies
Stocks valuation dips approximately N177 billion this week as investors baptise the Nigerian Exchange (NGX) with selloffs that persisted throughout the week following mixed performance scorecard by Tier-1 banks.
Data shows that the stock market has lost 0.8% of the equities valuations from the beginning of the month to date. Also, investors have 3.3% of the value of their stocks from the beginning of the year to date.
Some analysts attribute the development in the equity space to a fresh yields uptick recorded in the fixed income market, and as pressure on long-dated treasury bills slow down during the week.
CardinalStone Securities said in the second half macroeconomic report that fixed income market yields will have the biggest say in the equities market, adding that dark cloud NGX could linger.
Analysts noted that following the fast rise in yields since the beginning of the year -for instance, the 10-year bond yield has jumped 520 bps since the start of the year, there are indications that bond yields will remain elevated through the second half of 2021, which could portend further concern for equities in the near term.
Already, equities have lost this year, and the recently observed bond yield moderation has hardly had a positive impact on risk asset prices.
“There are indications that the moderation in yields could be short-lived, leaving for a somewhat bleak outlook for equity valuations”, CardinalStone stated.
While United Bank for Africa see a 36.35% earning jump in the first half, GTCO profit declined 15.76% – however both declare interim dividends but failed to upturned the bearish trend witnessed during the trading session.
In a report, Cowry Asset said the relatively weak financial performance by GTCO rubbed off on the equities market, hence, the NSE ASI moderated week on week by 0.86% to settle at 38,921.78 points.
Consequently, the year to date loss of the domestic bourse spiked to 3.35%. Sectoral performance was relatively positive as three out of the five indices tracked closed in green.
Specifically, the NSE Consumer Goods index, the NSE Oil/Gas index and the NSE Industrial index rose by 0.18%, 2.28% and 0.01% respectively to close at 550.13 points, 371.45 points and 1.959.24 points respectively.
NSE Banking Index and the NSE Insurance index moderated by 0.96% and 3.39% respectively to close at 373.16 points and 185.09 points respectively.
Meanwhile, trading activity appeared positive as some investors took position amid declining share prices. Hence the deals, volume and value of stocks traded increased by 4.60%, 12.26% and 45.82% respectively to 19,315 deals, 1.43 billion units and N13.07 billion respectively.
“We expect the equities market index to close in the negative territory next week as investors remain cautiously optimistic amid rising rates in the fixed income space and the depreciating Naira against the dollar”, Cowry Asset analysts projected.
In the week ahead, analysts at Cordros Capital told investors via an email that the firm anticipates cautious trading in the bourse following the monetary policy committee meeting scheduled for next week.
Notwithstanding, Cordros analysts advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.
Read Also: NGX Records Early Drops over Selling Rallies in Bellwethers
Also, Afrinvest said in a report that in the absence of positive catalysts, the firm expects the weak performance to persist in the coming week.
Stocks Losses Widen as Investors Baptise NGX with Selling Rallies
