Seek stocks with good fundamentals, analysts to investors
Though the Nigerian Exchange Limited, NGX started last week on a negative note, positive sentiments returned to the market towards the last two trading days as investors renewed buying interests in dividend-paying stocks.
Analyst have emphasized that the continued low traded volume on the Nigerian Exchange recently is an indication that smart money is sitting on the fence, as revealed through the daily and weekly money flow indexes.
They said this was coming at the backdrop of other investment windows are competing against the stock market, especially with the ongoing devaluation that has seen the Naira at over N570/$1 in the black market.
The NGX All-Share Index inched up 0.1 per cent to close at 38,943.87 points. Consequently, the Month-to-Date and Year-to-Date return moderated to -0.7 per cent and -3.3 per cent, respectively.
However, activity levels were weaker than the prior week, as trading volumes and value declined by -40.3 per cent and -17.9 per Week-on-Week, WoW, respectively.
Notably, the buying interest in the Guaranty Trust Group, GTCO, rising by 3.5 per cent, MTNN 1.5 per cent, and Access Bank 1.1 per cent drove the weekly gain.
On the other hand, sectoral performances were broadly negative following losses in the Oil and Gas index -3.4 per cent, Banking index -0.8 per cent, Insurance index -0.6 per cent and Consumer Goods index -0.2 per cent. Elsewhere, the Industrial Goods index closed flat.
Analysts at Cordros Securities Limited, said: “We expect the lull in the local bourse to persist until positive triggers in the form of lower Fixed Iincome, FI yields and improved dollar liquidity spur buying interest from domestic and Foreign Portfolio Investment, FPI investors.
“That said, we expect risk-averse investors to recalibrate their portfolio towards fundamentally sound stocks with attractive dividend yields in the week ahead. However, we advise investors to take positions in only fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings.”
Commenting on market development, analysts at InvestData Consulting said: “Technically, the seesaw movement of the NGX index’s action on low traded volume is a concern for technical traders, as players digest the latest inflation data and Treasury Bills, TBs, auction rates in the midst of foreign currency illiquidity. looking at the way of companies that depend less on imported raw materials, or had done full backward integration.
The ongoing development in the foreign exchange market is likely to affect the performance of companies; especially those engaged in manufacturing and depend mainly on imported raw materials.”