Equity market dips further by 1.11% week on week

 

Nigerian equities market extended losses this week, as the ASI dipped further by 1.11 percent week on week 41,472.10 points, causing the month-to-date and year-to-date returns to moderate to -4.29 percent and 8.44 percent respectively.
Similarly, the bear took control of market tempo as more equities shed weight in all trading sessions.
Performance of the market was largely bearish following the combined impact of sell offs in bellwethers – Dangote Cement (-3.4 percent), Nigerian Breweries (-4.9 percent), Nestle Nigeria (-4.6 percent) and Seplat Petroleum Development Company (-5.0 percent).
However, activity level was mixed as average volume of stocks traded increased by 13.4 percent to 463.2 million units while value traded declined by 8.7 percent to N5.8 billion. For the week, Zenith Bank (250.0 million), Access Bank (145.0 million) and African Insurance (130.1 million) were the top traded stocks by volume while Zenith Bank (N6.9 trillion), Guaranty Trust Bank (N4.4 trillion) and Access Bank (N1.6 trillion) were the top traded by value.

The local bourse opened the week on a negative note and this trend was sustained till Wednesday as the All Share Index lost 105bps on the first three trading days. The extended sell off created attractive entry opportunities; thus, we saw investors taking position in blue chip Banking and Consumer goods stocks Zenith Bank, Nigerian Breweries and Guaranty Trust Bank on Thursday and Friday. However, losses in Dangote Cement pulled the index 39 basis points lower at week close, offsetting the rally in other large- to mid-cap stocks.
Performance across sectors was largely bearish as 4 of 5 indices closed negative week on week.
Meanwhile, a total turnover of 2.328 billion shares worth N28.927 billion in 25,530 deals were traded this week by investors on the floor of the exchange in contrast to a total of 2.444 billion shares valued at N36.665 billion that exchanged hands last week in 26,712 deals.
The Financial Services Industry (measured by volume) led the activity chart with 1.784 billion shares valued at N20.385 billion traded in 16,823 deals; thus contributing 76.60 percent and 70.47 percent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 171.111 million shares worth N5.404 billion in 4,055 deals. The third place was occupied by Oil and Gas Industry with a turnover of 124.065million shares worth N296.727 million in 1,607 deals.
The Insurance index depreciated the most, down 3.1 percent as Mansard Insurance (-6.6 percent) and Niger Insurance (-16.7 percent) recorded losses. The Industrial Goods index followed closely shedding 2.8 percent as investors sold off positions in Dangote Cement (-3.4 percent) and Lafarge Africa (-5.7 percent). Similarly, the Consumer Goods and Oil & Gas indices fell 2.2 percent and 2.1 percent due to profit taking in Nigerian Breweries (-4.9 percent), Nestle Nigeria (-4.6 percent) and Seplat Petroleum Development Company (-5.0 percent). On the flip side, bargain hunting in Zenith Bank (+9.4 percent) and Guaranty Trust Bank (+4.5 percent) drove the Banking index 3.3 percent higher.
Market breath (advance/decline ratio) which measures investor sentiment strengthened to 0.7x from 0.4x recorded the prior week as 33 stocks advanced relative to 46 that declined. The top performing stocks were GlaxoSmithKline (+21.4 percent), Fidelity Bank (+17.7 percent) and Diamond Bank (+12.0 percent) while FTN Cocoa (-21.4 percent), Niger Insurance (-16.7 percent) and Unity Kapital (-21.4 percent) led the laggards.
The sell offs experienced in the market so far has been attributed to profit taking in stocks that had rallied significantly before the beginning of the earnings season as well as contagion effect of the rout in equities across global markets.
With investors skeptical of forward earnings vis-à-vis elevated valuations, sentiment has turned bearish in recent weeks.
Analysts at Afrinvest believed that declining level of valuation has presented investors with attractive entry opportunity; hence, they expect a reversal of the bearish trend in the near term.