Investors Seek Less Risky Assets Amid Political Tension, Others

  • Investors Seek Less Risky Assets Amid Political Tension, Others

Financial experts have attributed the continued profit-taking in the nation’s stock market to rising yield in the fixed income market and political tension, among others.

The All Share Index of the Nigerian Stock Exchange fell to its lowest point this year last week as some investors sold off their banking stocks.

Analysts at Meristem Securities Limited stated that the increased debt offerings, the rising yield in the fixed income market and mounting political uncertainties drove most investors to seek less risky and high-yielding instruments.

The Chief Executive Officer, Financial Derivatives Company, Mr Bismarck Rewane, told our correspondent that the sell-offs in banking stocks were as a result of the high liquidity of the stocks.

He noted that banks already declared their interim dividends, and the next time investors would be getting any dividends would be April 2019.

He said this, coupled with the high political tension in the country, could be a reason for the profit-taking.

The sell-offs intensified the losses in the year as the ASI and market capitalisation depreciated by 0.44 per cent to close at 32,058.28 basis points and N11.704tn, respectively. The ASI dropped to 31,864.80 bps on Thursday, its lowest level this year.

The year-to-date loss and market breadth closed at -16.17 per cent and 0.67x, respectively, with 24 gainers and 36 decliners emerging last week, as against the 27 gainers and 39 losers recorded in the previous week.

The NSE, in its weekly market report, said the top five gainers for the week were Unity Bank Plc, Flour Mills Nigeria Plc, Prestige Assurance Plc, Glaxo SmithKline Consumer Nigeria Plc, and Niger Insurance Plc, which saw their respective share prices appreciate by 30.99 per cent, 11.69 per cent, 9.80 per cent, 9.55 per cent and 9.09 per cent.

The top five losers for the week were Diamond Bank Plc, C & I Leasing Plc, Eterna Plc, Veritas Kapital Assurance Plc and University Press Plc, whose share prices dropped by 29.69 per cent, 26.43 per cent, 17.43 per cent, 14.81 per cent and 11.93 per cent, respectively.

The financial services industry (measured by volume) led the activity chart with 890.433 million shares valued at N8.113bn traded in 7,923 deals, thus contributing 69.31 per cent and 70.31 per cent to the total equity turnover volume and value, respectively.

The services industry followed with 284.370 million shares worth N585.368m in 298 deals, while the third place was occupied by the consumer goods industry with a turnover of 44.694 million shares worth N 2.054bn in 2,367 deals.

The NSE said trading in the top three equities – Diamond Bank Plc, Ikeja Hotel Plc and FBN Holdings Plc (measured by volume) – accounted for 708.003 million shares worth N1.758bn in 1,957 deals.

It said the equities contributed 55.11 per cent and 15.23 per cent to the total equity turnover volume and value, respectively.

The report showed that all indices finished lower with the exception of the consumer goods and industrial goods indices that finished higher by 0.04 per cent and 1.02 per cent respectively, while the NSE ASeM Index closed flat.

The market closed on a negative note in three days but appreciated marginally on Tuesday and Thursday.

Analysts at Afrinvest Securities Limited described the positive performance recorded at the bourse on Tuesday and Thursday as a “dead cat bounce.”

They said despite increased buying activity in some bellwethers as investors sought to take advantage of attractive pricing, sell pressures dominated trading activities during the week.

“The ASI started the week in the red, losing 0.2 per cent as investors sold off on banking stocks – Zenith Bank Plc, Guaranty Trust Bank Plc and Diamond Bank Plc. Despite the overall negative performance this week, we noticed increased buying activity in bellwethers and we expect this trend to be sustained this week as investors seek to lock-in on the current attractive pricing in the market,” the analysts said.

They predicted that the broad performance of the index would remain weak as investor sentiment would remain pressured by developments in the polity.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]; Tel: +2347065163489.

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