Q2 GDP: Analysts predict equities’ rebound

September 5, 2017/Punch

Stanley Opara

Financial market analysts are expecting the stock market to spring back in anticipation of the release of the country’s Gross Domestic Product figures for the second quarter of 2017, which are expected to be positive

 The market had recorded a loss last week owing largely to the profit-taking activities witnessed on certain large-cap counters alongside the paucity of market-driving news to stimulate buy pressures.

“Given our expectations of the release of a positive economic scorecard in the coming week, we envisage a moderate rebound in market activities,” analysts at Meristem Securities said in the firm’s weekly financial market report.

Closing down on all four trading days last week, the Nigerian equities market rounded off the week in the red zone for the third consecutive week. The NSE All- Share Index declined by 3.12 per cent, settling the year-to-date return at 32.11 per cent.

The market breadth reflected 21 advancers and 52 losers in the week as Cutix Plc emerged the top outperformer, advancing by 24.38 per cent to close at N2.50 while Mobil Oil Nigeria Plc recorded the largest price declines, sliding by 14.25 per cent.

Profit taking activities were seen on the actively traded tickers in the banking sector, leading to a negative close last week.

Thus, the analysts said, “While we expect the release of the Q2 2017 GDP numbers to drive activities into the positive region this week, we do not rule out trickles of profit taking on certain tickers.”

The bearish sentiments observed in the consumer goods sector were as a result of profit-taking on some bellwether stocks in the sector trading at relatively high levels. In the coming week, analysts expect further sell pressures in the consumer goods space.

For the healthcare segment of the market, its performance last week could be attributed to renewed investors’ appetite towards healthcare stocks. “While we expect this mood to persist this week, bouts of profit-taking activities may occur on May & Baker and Fidson, given that the stocks have returned 220.21 per cent and 160.94 per cent, respectively, year-to-date,” they said.

On the industrial goods sector, the analysts said, “This week, we expect an upturn in the sector’s activities, however, we do not rule out the possibility of a further share price decline on Dangote Cement Plc, which might drag the sector’s performance.”

The positive performance recorded at the close of last week on insurance stocks could be attributed to gains by some large cap stocks in the sector, and according to analysts, it is expected that the bullish sentiments will continue this week amid the possibility of profit-takings on certain counters in the sector.

In spite of the losses recorded by some stocks in the oil/gas sector last week, the sector’s gain at the close of the week’s trading activities was driven by the share price appreciation of Total and Seplat. “While we expect this positive mood to persist, we do not rule out some sell-offs in the week,” the analysts said.

They attributed the services sector’s loss to the general bearish sentiments that characterised the market last week, but stated that, “We expect a reversal of this performance this week.”

Meanwhile, the average money market rate declined by 4.42 per cent at the close of last week’s trading, to settle at 7.88 per cent. The naira also depreciated by 0.02 per cent week-to-date at the interbank forex market to close at N305.85/dollar.

The currency, however, appreciated by 1.37 per cent at the parallel forex market, closing the week at N365/dollar. Bullish sentiments dominated the treasury bills secondary market as the average T-bills yield declined by 0.57 per cent to close the week at 19.93 per cent. Yield declines were recorded on all tenors, save for the 9M tenor which advanced by 0.11 per cent.

At the close of trading last week, five instruments recorded yield advancement while yields on seven declined. Subsequently, average yield declined by 1.15 per cent to close at 15.89 per cent at the end of trades last week.

But analysts at Vetiva Capital Management, in a report, said, “Yields remained elevated and sticky in the fixed income market in H1 2017, driven by still-high inflation and a consequent tight monetary environment. In addition, whilst steps to improve dollar liquidity have buoyed the capital markets and the wider economy, changes in forex management flipped a switch in the fixed income space at the end of the first quarter.”

 

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