Analysts differ over market outlook as buy opportunities exist in most stocks

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Amid intensified regulatory efforts to restore investor confidence at the stock market, as investor apathy continues to mar equities’ performance, stock market analysts vary in their views over the direction of equities trading this week at the Nigerian Stock Exchange (NSE). At the nation’s bourse, companies earnings and investors optimism continue to move in different directions. Companies increased revenues with sustainable strategic options have not impacted positively on share price performance. This development continues to trigger questions at various quarters, even as most analysts believe that there is little justification for a fall in market cap or anemic performance of share prices as indicated in the All Share Index. While some analysts say the market outlook remains bearish, with a ray respite likely from attractive third-quarter (Q3) earnings release by blue-chip companies, some others appear bullish, saying that impressive Q3 results posted by quoted companies may sustain investors’ optimism and further boost market activities. This varied views come amid the optimism that buy opportunities still exist in most stocks with strong fundamentals.

Amid intensified regulatory efforts to restore investor confidence at the stock market, as investor apathy continues to mar equities’ performance, stock market analysts vary in their views over the direction of equities trading this week at the Nigerian Stock Exchange (NSE).

At the nation’s bourse, companies earnings and investors optimism continue to move in different directions. Companies increased revenues with sustainable strategic options have not impacted positively on share price performance. This development continues to trigger questions at various quarters, even as most analysts believe that there is little justification for a fall in market cap or anemic performance of share prices as indicated in the All Share Index.

While some analysts say the market outlook remains bearish, with a ray respite likely from attractive third-quarter (Q3) earnings release by blue-chip companies, some others appear bullish, saying that impressive Q3 results posted by quoted companies may sustain investors’ optimism and further boost market activities.

This varied views come amid the optimism that buy opportunities still exist in most stocks with strong fundamentals.

According to Cowry Asset Management analysts, as interest rates mount up to the 20 percent mark on the back of recent hike in the monetary policy rate (MPR) by 275 basis points, coupled with the lingering investors apathy, “the Nigerian equities market remains disadvantaged as investors switch to higher yield instruments.

“This week, we expect to see more bearish siege on the back of likely increases in money market rates, providing a more attractive alternative.” In line with most analysts’ prediction, the equities market was upbeat last week, having witnessed bargain hunting activities amid a number of positive company releases. As a result, trading at the NSE has closed on a positive note after about two weeks of bearish mood.

The NSE All-Share Index appreciated by 387.62 points or 1.9 percent to close at 20,257.47 points, while the market capitalisation of the 188 First -Tier equities increased to N6.412 trillion. The NSE-30 Index appreciated by 19.69 points or 2.2 percent to close at 900.36.

All four sectorial indices appreciated a reversal of the preceding week when all the indices depreciated. The NSE Food/Beverage Index appreciated by 0.88 points or 0.1 percent to close at 632.65. The NSE Banking Index appreciated by 6.87 points or 2.5 percent to close at 287.92. The NSE Insurance Index appreciated by 5.69 points or 3.9 percent to close at 149.57. The NSE Oil/Gas Index appreciated by 10.94 points or 4.6 percent to close at 245.47.

Stock market report last week showed that a turnover of 1.4 billion shares worth N9.9 billion in 16,934 deals was recorded in contrast to 1.3 billion shares valued at N11.48 billion, exchanged the preceding week in 18,940 deals. Sterling Capital analysts said this week they expect increased liquidity to moderate short-term interest rates in view of the anticipated release of Statutory Allocations for the month of September by the Federal Government.

“This would most likely impact positively on the stock market, while the impressive Q3 earnings should continue to give impetus to investors to take position in view of current low prices of stocks. Buy opportunities continued to exist in stocks with good fundamentals for long term,” they added in their recent market outlook.

Analysts at Access Bank said the fact that companies, especially banks exceeding their profit expectations during the quarter, gave support to equities last week.

They said: “Stocks also became the primary beneficiary of the uncertainty in the bond market. This was due to the significant dip in bond prices after the Monetary Policy Committee (MPC) decision to increase MPR to 12 percent from 9.25 percent. The bond market is in a post-MPC price discovery phase and trading has been muted in recent days.

“We are dialling back our outlook, stated last week, for the market (stock market) from ‘possible sustained decline’ to ‘temporary rebound in buying momentum.’ Our view is premised on the impressive Q3 results posted by quoted companies. We believe these numbers may sustain investors’ optimism and further boost market activities.”