Equities Incur N635 Billion Loss as Investors Accelerate Profit-Taking

If positive market turnover was the sole trigger of a bullish market, the Nigerian equity market would surely be in a celebration mode by now and even sustain the mood for the next few trading days due to the significant upsurge it recorded in traded volume and value this week.

The market however closed in the red territory after incurring N635 billion loss despite accelerated market activity level that led to 1,461.74% and 666.18% growths in the week’s volume and value of trades on the floor of the Nigerian Exchange Limited (NGX).

The loss was a result of profit-taking by investors whose desire to reap capital rewards from previous gains outweighed pressure from the purchase side of the market.

Consequently, the All-Share Index dropped by 2.18% to close at 52,908.24 basis points while market CAP, representing the aggregate value equity investments in Nigeria, shed N635 billion to close the week lower at N28.523 trillion.

Based on the preceding, the year-to-date (YTD) return of the NGX settled lower at +23.9%.

Data obtained from the local bourse showed that the equity market suffered significant blow from Profit-taking witnessed in the shares of OKOMUOIL (-10.0%), PRESCO (-10.0%), NB (-8.1%), WAPCO (-4.1%), and MTNN (-3.0%).

Although, securities with highest percentage losses but minimal impact on the market are Conoil Plc and Wema Bank, shedding 15.04% and 12.33% respectively.

Sectoral performance was broadly negative as losses in the Insurance (-5.5%), Industrial Goods (-3.7%), Consumer Goods (-2.5%), Banking (-0.7%), and Oil and Gas (-0.4%) indices reflected the overall negative sentiments in the market.

Ballooned Activity Level

Despite the loss, the market was busy throughout the week, with the shares of Union Bank of Nigeria being among major driver as it subsequent to a block-divestment in the Nigeria’s second oldest bank during the week.

Specifically, a total turnover of 28.736 billion shares worth N209.060 billion in 23,688 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 1.840 billion shares valued at N27.286 billion that exchanged hands last week in 27,273 deals.

Measured by volume, the Financial Services Industry led the activity chart with 28.048 billion shares valued at N198.017 billion traded in 10,416 deals; thus contributing 97.61% and 94.72% to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with 434.845 million shares worth 1.339 billion in 1,225 deals, while the third place was the Consumer Goods Industry, with a turnover of 74.111 million shares worth N2.853 billion in 3,835 deals.

Trading in the top three equities namely Union Bank Of Nigeria Plc, Transnational Corporation Plc and FBN Holdings Plc (measured by volume) accounted for 27.841 million shares worth N193.488 billion in 1,872 deals, contributing 96.89% and 92.55% to the total equity turnover volume and value respectively.

A total of 43,648 units of Exchange Traded Fund (ETP) valued at N987,351.25 were traded this week in 24 deals compared with a total of 26,718 units valued at N2.381 million transacted last week in 26 deals.

At the fixed income segment of the market, investors traded a total of 20,402 units of bonds valued at N21.440 million were traded in 10 deals compared with a total of 157,574 units valued at N164.735 million transacted last week in 22 deals.

WHAT EXPERTS ARE SAYING

Analysts at Cordros Capital Research: “We believe a “choppy theme” will be the overarching theme in the local bourse as investors continue to play close attention to the direction of yields in the FI market. Following the moderation in the share prices of bellwether stocks this week, we see scope for the bulls to make a re-entry in stocks with attractive dividend yields. However, we reiterate the need for positioning in only fundamentally sound stocks as the macroeconomic environment’s fragility remains a significant headwind for corporate earnings.”

Analysts at Cowry Asset Management Limited: “In the new week, we expect to see a mixed reaction to the daily change of the local bourse. This we believe will be as a result of no upcoming company’s financial release for the new week. However, Investors are advised to trade on companies’ stocks with good fundamentals and positive outlook so as to avoid falling into the bear trap.”

Investdata Analysts: “The indexes and price correction witnessed since the beginning of the week’s trading are attributed to price adjustments in blue-chip and highly-priced stocks for the 2021 full-year dividend as recommended by their boards. Also, profit booking continues across the major sectors, just as funds continue to flow into the fixed income space appealing to some investors, especially those who are risk-averse.

“Bear markets move with greater velocity than bull markets and are accompanied by high volatility, due to investors’ emotions. With the rate hike triggering the flow of funds from equities to the fixed income market, the spiraling inflation may support the entry of funds into commodity-backed securities or stocks to hedge against inflation.”