Analysts expect profit-taking activities this week

The recent gains in the equities market may lead to profit-taking this week, capital market analysts have said.

After weeks of negative performances, equities rallied last week to close on Friday with a 2.42 per cent week-on-week appreciation. The Nigerian Stock Exchange All-Share Index and market capitalisation of the listed equities stood at N29,511.08 basis points and N10.148tn, respectively.

This was achieved after investors exchanged 2.440 billion shares worth N21.071bn in 22,736 deals, and analysts believe some investors would cash in on the gains this week.

“While we expect investors to react to news flows to the market, we are not optimistic that the bullish trend will be sustained in the coming week, as we anticipate that profit-taking activities will dictate the market’s direction,” analysts at Meristem Securities Limited said in their investment guide for this week.

Reviewing the performance of the stock market last week, they observed that after three consecutive weeks of negative week-on-week returns, the equities market rebounded last week, following three trading days of gains.

Although the NSE ASI advanced by 2.42 per cent last week, that was not enough to push the index level above the 30,000pts mark, as it closed at 29,511pts.

“The extended rally from the last two trading days in the prior week may be attributed to bargain-hunting activities buoyed by the attractive prices at which most fundamentally justified stocks were trading in the course of the week,” the analysts said, adding that volume traded and market capitalisation appreciated by 18.94 per cent and 17.92 per cent, respectively last week; just as 57 stocks increased in value against 21 price decliners.

On their part, analysts at Vetiva Capital Management said they expected last week’s “see-saw trading on the NSE (in which gains have been supported by the recent rally in Brent crude) to continue into the next trading sessions.

“Given the unsuccessful Open Market Operation auctions in the past week, we expect the Treasury-bill market to open the week on a positive note as liquidity remains decent. However, we anticipate the CBN will attempt another OMO auction to mop up liquidity in the week ahead.”

On the global scene, the Vetiva analysts explained that as China’s deteriorating economy continued to weigh on investor sentiment, global markets experienced volatile trading in the past week.

“Shanghai Composite Index opened the week at a 0.78 per cent decline and sustained its bearish trend all week. On the other hand, United States and European stocks were mixed on the back of positive economic data and the ECB’s decision to extend stimulus measures,” they said.

“By week close, global stocks headed south as investors weighed the August labour report, in which unemployment was reported to have fallen to 5.1 per cent even though US non-farm payroll data came in lower than expected; thus increasing the likelihood of a potential rate hike in September.”

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