Market analysts project relief from losses as as YTD loss hits 15.5%

The Relative Strength Index (RSI) currently at 20.5 points indicates the market is in the oversold region hence an opportunity for re-entry and an upturn in the fortunes of investors, says analysts at Afrinvest, in their insight into the activities of the equities segment at Nigerian stock market.

According to their analysis, a review of trading activities at the domestic bourse in the week ended Friday, September 14, 2018, the bearish run was stretched into the seventh consecutive trading session, following sustained sell-offs on market bellwethers.

The sell offs were stoked by political concerns as well as soft investor sentiment towards frontier and emerging market assets. However, there was some respite on Friday as the benchmark index advanced.

Analyst say since the rout started at the tail end of January, the Nigerian market has lost 27.3 per cent, one of the worst performing within this period, globally.

“With no fundamental driver to boost investor sentiment on the horizon, we believe the current weak performance will persist, although we expect speculative trading to shape activities pending the completion of the general elections in 2019,” Afrinvest analysts noted.

At the start of last week, the All Share Index declined by 1.3 per cent and the bearish performance was sustained till Thursday before the market gained 1.0 per cent on Friday.

The largest daily loss in the past eight months was recorded on Wednesday (3.5 per cent) as investors sold off bellwethers in the banking and industrial goods sectors.

Accordingly, the benchmark index fell 5.0 per cent week-on-week to 32,327.59 points, while year-to-date loss worsened to –15.5 per cent.

Similarly, investors lost N624.4 billion as market capitalisation reduced to N11.8 trillion, the lowest level since July 2017.

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However, activity level strengthened as average volume and value traded improved 7.6 per cent and 40.2 per cent to 251.7 million units and N4.7 billion respectively.

The top traded stocks by volume were Guaranty Trust Bank (73.0m units), Access Bank (68.6m units) and Zenith Bank (61.1m units) while Dangote Cement (N5.0 billion), Guaranty Trust Bank (N2.4 billion) and Nestle Nigeria (N1.6 billion) were the top traded stocks by value.

The industrial goods index depreciated the most, falling 7.6 per cent week-on-week following sell off in Dangote Cement (-5.8 per cent) and WAPCO (-10.0 per cent).

In the same vein, the insurance and consumer goods indices slid 5.9 per cent and 5.4 per cent respectively week-on-week due to price depreciation in Linkage Assurance (-15.7 per cent) and Nestle (-8.7 per cent).

The banking index trailed, losing 4.4 per cent week-on-week against the backdrop of losses in Zenith (-4.1 per cent) and United Bank for Africa (-6.3 per cent) while the oil & gas index dipped 1.7 per cent week-on-week.

Investor sentiment stayed soft this week as market breadth weakened to 0.2x from 0.8x in the previous week following 12 stocks that advanced relative to 56 stocks that declined.

Our outlook for equities in the near-to-medium term is negative, and we guide investors to trade cautiously, amidst absence of a near term positive catalyst and political jitters ahead of the upcoming 2019 elections. However, macroeconomic fundamentals remain stable and supportive of recovery in the long term.