Bears Extend Hold at the Stock Market

The bearish sentiment in the Nigerian bourse continued on Wednesday as sustained sell-offs in bellwether equities dragged the index down 0.8% to berth at 25,653.14 points (a 25-week low) whilst YTD loss worsened to -10.4%.

Bearish sentiment towards NESTLE (-1.8%), GUARANTY (-1.8%), and FORTE (-7.4%) impacted market performance as investors lost N70.2bn in value, bringing market capitalization down to N8.8tn.

However, activity level remained mixed as volume traded dipped 23.2% to 145.7m units while value traded rose 49.2% to settle at N1.4bn with total number of deals closing at 2,421.
Industrial Index Emerges Lone Gainer
Contrary to the previous trading session, performance across sectors was largely bearish as all indices closed in the red save for the Industrial Goods index which rose 8bps on the back of gains in WAPCO (+0.2%). The Oil & Gas index (-1.8%), pressured by sell-offs in FORTE (-7.4%) and OANDO (-4.9%), emerged the top sector loser.

Likewise, the Banking index shed 1.2% on the back of weak appetite for Tier-1 lenders - ZENITH (-1.4%) and GUARANTY (-1.8%) while the Consumer Goods index lost 0.9% on account of losses in NESTLE (-1.8%) and 7UP (-9.7%). Similarly, the Insurance index depreciated 0.3% at the close of trade.

Lackluster Breadth Highlights Weak Sentiment
Investor sentiment waned significantly as market breadth (advancers/decliners ratio) declined to 0.1x - 6 advancers versus 33 decliners - from 0.5x yesterday. The best performers were FIDSON (+4.9%), INTBREW (+4.7%) and UBN (+3.4%) while 7UP (-9.7%), TRANSCOHOT (-9.7%) and PAINTCOM (-9.5%) were the worst performers.

Performance of the equities market has been uninspiring in the past one month, with the broader index down 7.9% within the period. This could be explained by investors’ pessimism regarding macroeconomic fundamentals (particularly FX market illiquidity), high discount rate and bearish forward earnings expectation. However, given the current downtrend, some stocks have fallen to attractive positions for bargain hunters and we see domestic investors taking advantage of these opportunities in sessions ahead.