Investors in equities have lost N1.363 trillion in February following massive profit takings and low sentiment to growing concerns about the rising yields in the fixed income market.
Analysts attributed the drop in the indices to profittaking by investors, saying the trend may be sustained as investors continue to leverage the appreciation recorded in January.
Again, the NTB auction results wherein stop rates rose by an average of 254bps to 3.67 per cent (from 2.33 per cent at the last auction) also weighed on investors’ sentiment.
The upward yields in the fixed income market has continued to dampen investors’ interest inequities as the bearish performance in the Nigerian Stock Exchange (NSE) extended to a fourth consecutive week.
Accordingly, the All- Share Index fell below the 40,000 psychological mark, declining by 0.96 per cent week on week (w/w) to close at 39,799.89 points. Consequently, the YTD return dipped further in the negative territory, settling at -1.2 per cent.
Available statistics to New Telegraph showed that activities on The Exchange, which opened the trading year at N22.186 trillion in market capitalisation and 42,412.66 in index at the beginning of trading on February 1, 2021, closed the month at N20.823 trillion and 39,799.89 index points, hence has earned a loss of about N1.363 trillion or 6.2 per cent during the month.
With the latest outcome of the NTB auction pointing towards yield elevation in the near term, analysts urged investors to trade cautiously while taking positions in stocks with attractive dividend yields.
Analysts at Codros capital said: “We expect the local bourse to exhibit a zig-zag pattern in the near term as the opposing forces of an uptick in yields and fullyear 2020 corporate earnings releases dictate market performance.
“Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings. “In the week ahead, we expect the NSE floor to be flooded with corporate earnings as more companies publish their audited FY 2020 numbers, accompanied by dividend declarations.
“We believe this should provide respite for market performance. However, we expect intermittent profittaking activities to continue due to lingering concerns about yield elevation in the FI market.
“As a result, we think the local bourse will likely exhibit a zig-zag pattern. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”
Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, reacting to the development, said: “While chart watchers and market participants await a trigger to drive the anticipated reversal of trend, these pullbacks are creating buy opportunities ahead of earnings expectation.”
To analysts at Cowry Asset Management Limited,
“In the new week, we expect the local equities market to further trade southwards as investors trade cautiously amid rising fixed income yields.
However, we expect investors to position in companies expected to announce good dividend payments”.