Following the decline recorded in the indices of stocks on Monday, market Operators have predicted further lull in response to the decision of the Central Bank of Nigeria (CBN) to takeover Skye Bank.
On Monday equities trading on the Nigerian Stock Exchange (NSE) closed on a bearish note as lead indicators, All Share Index (ASI) lost 303.34 points to close at 29,002.06 representing one per cent depreciation, while market capitalisation declined to nine trillion naira mark closing at N9.960 trillion compared to N10.064 trillion recorded as the closing figure for last week.
According to a market analyst, Rotimi Fakayejo, the bear trend would persist as the market feeds on information, which in recent times had been negative.
“Trading on Friday will definitely close flat tomorrow because the market feeds on information and when the information is negative it might step down the market. For instance, the negative news at present is that of Skye bank.”
He noted that not only banking stock would be negatively affected by the Skye bank news as others would follow suit. “It definitely will impact on the market because it’s a bandwagon effect. When it affects banking stocks others are affected as well. Investors will withdraw to an extent.
“On Monday we saw a sharp drop in the values of transactions traded, On Friday, we are going to see more of that as well,” he added.
He however noted that the decline might be slight if blue chip stocks record a bit of gain. “If high cap stocks suffer further lose, there will be a sharp decline, if not the decline might be between one or 1.5 per cent,” he added.
Another analyst at Gruene Capital Limited noted that the expected lull in the market can be traced to the long unexpected sallah holiday within the week, as investors would trade cautiously on Friday.
“It’s been a long holiday; investors will trade with caution because they will not want to herald. People will have spent lot of money during the long sallah holiday, therefore a lot will be trying to take positions.”
According to Aruna Jimoh, stocks that might pick up are those intending to pay interim dividend as the financial third quarter begins because most investors would want to take the advantage.
“We are in the second half, and the first half results will soon be released. And it is best to take positions long before it happens, especially the fundamental stocks paying interim dividend.”
Earlier in the week, analyst at Vetiva Capital Management Limited had projected that with the Q2 earnings season drawing nearer mixed performances were expected.
“We do not rule out the possibility of investor positioning ahead of these releases this week. This implied that, we foresee mixed performances across stocks at week open.”