Equities pricing: Earnings reports, dividend expectations to temper bearish sentiment

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Nigerian Stock Exchange

By Nkiruka Nnorom 

Investment analysts have said that there could be a possible reversal of the three week downward trend in the equities market this week following the anticipation of release of full year earnings reports coupled with dividend declarations by quoted companies.

They, however, observed that despite the respite expected from the release of 2020 earnings reports, profit taking activities may still keep sentiment low.

This is even as investors lost N13 billion last week as bearish performance extended to a third consecutive week as a result of the upward retracement in yields in the fixed income market as well as further spike in inflation rate.  

Consequently, the market capitalisation dropped to N21.026 trillion from N21.256 trillion, while the All Share Index (ASI)  shed 0.6 percent to close at 40,186.70 points.

Sell-offs in Stanbic IBTC Holdings Plc,(-14.0%), BUA Cement Plc (-1.8%) and MTN Communication Nigeria Plc (-1.1%) fuelled the weekly loss.  

Also,  the sectoral performance was negative as three of the five sectors recorded losses. With the exception of the oil and gas (+4.6%) and banking sectors (+0.5%) that posted gains, the Insurance (-1.7%), consumer goods (-1.0%) and industrial goods (-0.7%) recorded losses.     Activity level was also weak, as volume and value traded declined by 42.6 percent week-on-week (w/w) and 22.9 percent w/w, respectively.

In their forecast, analysts at Cowry Asset Management Limited, a Lagos-based investment banking firm,  said: “We expect the local equities market to close northwards as investors’ position in stocks with good dividend yields ahead of the release of audited full year 2020 financial results and announcement of corporate actions in the coming weeks.”

Also,  analysts at Cordros Capital said: “We expect the deluge of corporate earnings accompanied by dividend declarations to temper bearish sentiments within the week.  

“However, we do not rule out the possibility of continued profit-taking activities due to growing concerns about yield elevation in the  fixed income market.   As a result, we think the local bourse will likely exhibit a zig-zag pattern.”  

  

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