Financial analysts are predicting a sustained bullish trend in the Nigerian stock market with continued buying interest on blue-chip stocks amid ongoing asset and sector rotations.
The stock market closed upward last week as it saw market players digest the recently released Nigeria’s third-quarter economic performance, revealing a 2.54 per cent uptrend while the market observed strategic moves by investors engaging in portfolio reshuffling and rebalancing activities, anticipating the year-end, dividend season, and the potential impact of the forthcoming Santa-Claus rally.
Already, the unaudited third quarter (Q3) 2023 earnings reports have offered a glimpse into the expected Santa Claus rally. Specifically, the earnings reports presented through the exchange offered an insight into the high possibility of dividend growth at the end of this current financial year, especially among companies in the service sectors whose earnings yield and earnings per share support higher payout ratios at the end of the day.
Analysts Optimism
Going into the new week, analysts at Cowry Assets Management Limited said: “we see a sustained bullish trend in the Nigerian stock market with continued buying interest on blue-chip stocks amid ongoing asset and sector rotations.
“The anticipation is set against the backdrop of the upcoming Santa Claus rally and year-end window dressing activities orchestrated by fund managers. The strategic focus on blue-chip stocks aligns with investor preferences for stability and value in well-established companies.
“The prevailing bullish momentum is seen as indicative of broader market confidence in the economic outlook, accentuated by the traditional optimism associated with the holiday season. 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.”
However, Cordros Securities Limited said, “we anticipate cautious trading in the local stock market in the coming week due to the absence of significant positive catalysts to boost sentiments.
“Overall, we reiterate the need for positioning in only fundamentally sound stocks as the unimpressive macro environment remains a significant headwind for corporate earnings.”
Last Week’s Trading Activities
Like the global stock market, the local bourse faced subdued momentum as investors traded cautiously. However, despite concerns about the inconsistencies in the Monetary Policy Committee (MPC) meetings, especially with the postponement of last week’s meeting, the market closed in the green, overcoming pressure from profit-taking activities during the week.
Notably, the All-Share Index rose by 0.17 per cent week-on-week (W-O-W) to close at 71,230.48 points. Similarly, the market capitalization of listed equities expanded by N65 billion to close at week at N39.173 trillion.
While the overall market performance was positive, there was a minor setback in the NGX Consumer Goods index with a weekly decline of 0.53 per cent due to specific adverse price movements.
Conversely, the NGX Insurance index emerged as the week’s leading gainer, experiencing a 4.07 per cent increase. Furthermore, the NGX Banking and NGX Industrial Goods indices recorded gains of 1.94 per cent and 0.04 per cent, respectively.
Market breadth for the week was positive as 59 equities appreciated in price, 21 equities depreciated in price, while 76 equities remained unchanged. Mecure Industries led the gainers table by 60.73 per cent to close at N9.21, per share. Multiverse Mining and Exploration followed with a gain of 60.06 per cent to close at N5.81, while Unity Bank went up by 57.26 per cent to close to N1.84, per share.
On the other side, Thomas Wyatt Nigeria led the decliners table by 42.22 per cent to close at N2.08, per share. Ellah Lakes followed with a loss of 10.05 per cent to close at N3.40, while Stanbic IBTC Holdings declined by 7.08 per cent to close at N65.00, per share.
Overall, a total turnover of 2.425 billion shares worth N22.665 billion in 33,230 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 2.025 billion shares valued at N27.693 billion that exchanged hands previous week in 32,763 deals.
The Financial Services Industry (measured by volume) led the activity chart with 1.721 billion shares valued at N11.647 billion traded in 14,585 deals; contributing 71.00 per cent and 51.39 per cent to the total equity turnover volume and value respectively. The Services Industry followed with 185.692 million shares worth N424.729 million in 2,816 deals, while the ICT Industry traded a turnover of 139.865 million shares worth N4.440 billion in 2,971 deals.
Trading in the top three equities; Universal Insurance, Veritas Kapital Assurance and Unity Bank Plc (measured by volume) accounted for 809.400 million shares worth N492.625 million in 2,005 deals, contributing 33.38 per cent and 2.17 per cent to the total equity turnover volume and value respectively.
