EQUITIES: Analysts expect further market correction

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Stock exchange
Nigerian Stock Exchange

•Investors adopt defensive game

By Nkiruka Nnorom

The weak sentiment in the equities market is likely going to continue in the near term following what investment analysts see as extended price correction.

They said that besides reacting to the uptick in yield in fixed income, investors may be adopting a defensive approach to investment as the last rally was quite excessive.


Meanwhile stock market investors lost N354 billion last week to the bearish trend, fueled by  seeming negative reactions to the audited full-year financial result, especially the dividend cut, announced  on Monday by the United Bank for Africa Plc.

Explaining the persistent bearish movement, which has now lasted for six weeks, David Adonri, Managing Director/CEO, Highcap Securities, stated that, “many investors are apprehensive that corporate fundamentals may not justify further rally in equities.  As a result, investors are adopting defensive strategies until proved otherwise by stocks which will meet or surpass expectations.”

According to him, the market may also be experiencing some correction, adding that the last bullish run was too excessive.

Meanwhile, analysis of trading activities last week showed that although the market closed positive on two of the five trading days, the gain was insufficient to lift the market to the green zone.  

Accordingly, the All Share Index (ASI) declined by 1.7 percent to close at 38,648.48 points, dragging the Year-to-Dare (YTD) return further into negative territory at -4.0 percent, while market capitalisation closed lower at N20.221 trillion.  

Sell off in bellwether stocks, including UBA (-10.0%), MTN Communication Nigeria   (-7.0%), Zenith Bank Plc (-5.4%) and Guaranty Trust Bank   (-0.9%) drove the weekly loss. Sectoral performance was largely negative with the exception of the industrial goods sector that rose by 1.3 percent.

Analysts at Cordros Capital noted that the cashing out that played out in the market would persist this week as investors continue to cherry-pick dividend-paying stocks and, at the same time, exhibit reluctance in leaving gains in the market.  

“With uncertainties about the direction of yields in the fixed income market still bugging investors’ minds, the bears are likely to retain dominance in the market,” they said.  

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