Monday, 31 October 2011

Analysts differ over marketoutlook as buy opportunitiesexist in most stocks

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
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
“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
“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

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