Nigeria: Profit-Taking Slows Down Stock Market Rally

15 February 2021

The year-to-date (YTD) growth of the nation's stock market has moderated to 0.4 per cent as at last Friday, following persistent bearish sentiment propelled by profit-taking and the gradual return of some investors to the fixed income market.

After soaring by 50.03 per cent in 2020, the market gained 5.3 per cent in January as investors remained attracted by high yields and expectation for dividends from the earnings season ended December 2020.

However, since the beginning of February, the market has remained under the tight grip of the bears as investors continued to sell to lock in profits. Besides, the uptick in yields in the fixed income market has changed the minds of some investors who are reducing their exposure to the equities market.

Consequently, the market has been recording decline that has eroded significant part of the gains recorded in January.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) depreciated by 3.04 per cent last week to close at 40,439.85, the biggest weekly fall in eight years. Similarly, the market capitalisation went down by same margin to close at N21.156 trillion. As a result, the YTD gains printed at 0.4 per cent.

According to market analysts, given the yield elevation in the fixed income market in the near term, investors would continue to trade cautiously while taking positions in stocks with attractive dividend yields.

They said: "As a result, we expect the local bourse to exhibit a zig-zag pattern in the near term as the opposing forces of uptick in yields and full year 2020 corporate earnings releases dictate market performance.

"Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings."

In terms of turnover, investors traded 2.683 billion shares worth N23.662 billion in 27,844 deals last week compared with 2.767 billion shares valued at N29.685 billion that exchanged hands in 31,380 deals the previous week.

The Financial Services Industry led the activity chart with 2.032 billion shares valued at N13.416 billion traded in 14,832 deals; thus contributing 75.74 per cent and 56.70 per cent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 181.766 million shares worth N3.601 billion in 4,676 deals, while the third place was occupied by the Conglomerates Industry, with a turnover of 175.085 million shares worth N324.006 million in 1,168 deals.

Trading in the top three equities namely Living Trust Mortgage Bank Plc, First Bank Holding Plc and Zenith Bank Plc accounted for 1.208 billion shares worth N6.580 billion in 3,785 deals.

Meanwhile, only 16 stocks appreciated last week, lower than 22 equities in the previous week, while 55 equities depreciated in price, lower than 60 equities in the previous week.

Mutual Benefits Assurance Plc led the price gainers with 10.5 per cent, trailed by Morison Industries Plc with 10 per cent. MCNichols Plc chalked up 9.5 per cent, just as UPDC Real Estate Investment Trust garnered nine per cent. UACN Property Development Company Plc added 6.6 per cent, while Guinness Nigeria Plc, Academy Press Plc, Fidson Healthcare Plc, Skyway Aviation Handling Company Plc and Cutix Plc appreciated by 6.3 per cent,6.0 per cent, 5.6 per cent,5.5 per cent and 3.6 per cent.

Conversely, Northern Nigeria Flour Mills Plc led the price losers with 18.8 per cent, followed by NEM Insurance Plc with 18 per cent. Royal Exchange Plc shed 16.6 per cent, just as Guaranty Trust Bank Plc and Livestock Feeds Plc depreciated by 15.6 per cent and 15.0 per cent respectively.

Other top price losers included: Ardova Plc(12.8 per cent); Union Bank of Nigeria Plc (11.2 per cent); AIICO Insurance Plc (10.7 per cent); E-Tranzact International Plc and CAP Plc (10 per cent apiece).

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