- Analysts Predict Weak Start for Capital Market
Financial analysts say the capital market is likely to start the week on negative note following the bearish trend that trailed the market last week.
Bearish sentiments pervaded the equities market last week, as the Nigerian Stock Exchange All-Share Index declined by 1.15 per cent week-on-week to peg the year-to-date return at -5.80 per cent.
The market closed negative on four out of the five trading days of the week.
“This week, we expect the current market mood to persist in the absence of positive news flow to sway investors’ sentiments. Therefore, we advise value-seeking investors to trade with caution,” analysts at Meristem Securities Limited said in the firm’s weekly report.
Third quarter 2016 earnings, releases flooded the market on Monday last week, being the deadline for result submission by listed companies. The results were mixed across board, thus generating varied reactions from investors.
However, the volume traded and value of transactions advanced by 2.29 per cent and 12.45 per cent week-on-week, respectively.
The naira depreciated against the United States dollar by 7.42 per cent week-on-week at the inter-bank segment of the market, as the spot rate settled at N328.90/dollar. However, at the parallel market, the currency traded flat week-on-week to close at N470/dollar at the end of the week.
There was net Open Market Operation sales of N31bn, arising from repayment and auction of N138bn and N169bn, respectively. Consequently, system liquidity declined, resulting to an increase in the Open-by-Back and Overnight rates by 3.83 per cent and 2.75 per cent week-on-week accordingly, to settle the average money market rate at 13.25 per cent at the end of last week.
On what will shape the markets this week, analysts at Vetiva Capital Management Limited said, “On the equity market, save for some late session spikes during Friday’s session, we note that the NSE ASI was on a downward trend over the final hour of trade amid sell pressure across board. This points to a weak open this week.
“Although the demand for Treasury bills remained resilient at the week’s close despite consistent Central Bank of Nigeria’s mop up, we anticipate a relatively tepid trading session at the week open across the fixed income space.
“Given the significant weakness recorded at the week close, we expect the CBN intervention at the week open.”
Investors’ demand for Treasury bond instruments was quite strong last week, with a noticeable bias for shorter-termed instruments. Consequently, the average bond yield trended southward to settle at 19.58 per cent as of November 3, 2016, reflecting a 0.14 per cent week-to-date decline.
Also, the result of T-bills auction held last week showed that rates were slightly higher than at the previous action. The stop rates for the 91-day, 182-day and 364-day instruments were 14 per cent, 17.50 per cent and 18.50 per cent, respectively.
In the Treasury bond space, there were mixed reactions, as the average yield remained flat at 16.16 per cent with investors’ sentiments tilting towards the shorter end of the curve.
“We expect this trend to continue in the short term,” the Meristem analysts said.
