Sunday, February 7, 2021

Uptick in fixed yield triggers massive selloff in equities

[FILES] The reception area at the Nigerian Stock Exchange in Lagos, Nigeria. PHOTO: Ruth McDowell/ 2019 Bloomberg Finance

 By Helen Oji

The marginal uptick in yields in the fixed income market propelled massive selloff on the equity sector of the Nigerian Stock Exchange (NSE) last week, as the NSE All-Share Index (ASI), and market capitalisation depreciated by 1.66 per cent to close the week at 41,709.09 and N21.819 trillion, respectively.

Similarly, all other indices finished lower with the exception of the NSE Growth Index, which appreciated by 3.26 per cent, while the NSE ASeM Index closed flat.

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Analysts linked the slowdown in the equity space to the yield improvement recorded in the fixed income space last week.

According to them, this week’s trading sessions would be a mix of bargain-hunting and sustained profit-taking activities, even as the direction of yields in the fixed income market is expected to influence trading given the increase in marginal rates at the OMO auction this week.

The Chief Research Officer, Investdata Consulting Limited, Ambrose Omordion said:

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“Speculation seems to have slowed down in the equity space, on seeming yield improvement in the fixed income space, as market volatility continues to rise on the general decline of the key performance index and prices of stocks across all capitalisation size and sectors, except for the oil/gas that closed in the green.

“We expect the market to slow down its losing momentum and profits-taking, as bargain-hunters take advantage of the pullbacks to reposition their portfolios ahead of earnings expectations and reaction to numbers that would be unveiled, given that dividend yield remains relatively high.

He added: “The decline in Nigeria’s equity market is, notwithstanding, creating another entry opportunity for discerning investors as the benchmark All-Share index breaks down.

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“The price corrections or pullbacks have made some of the equities become more attractive for positioning, given the noticeable improvements in their yields.”

Also, analysts at Afrinvest Research said: “The equities market reversed last week’s bullish momentum with sell-offs dominating trades all week. We expect trading sessions to be a mix of bargain hunting and sustained profit-taking activities.

“The direction of yields in the fixed income market would also influence trades especially given the increase in marginal rates at the OMO auction this week.”

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Analysts at Codros Capital said: “With the moderation in the prices of bellwether stocks this week, we expect savvy investors to take advantage of this and make re-entry ahead of their FY 2020 earnings announcement.

“However, we note that the recent hike in OMO rates by the CBN will continue to stoke uncertainties on the direction of yields, keeping risk-averse investors on the side-lines.

“Thus, we expect zig-zag market performance in the week ahead. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”

[FILES] The reception area at the Nigerian Stock Exchange in Lagos, Nigeria. PHOTO: Ruth McDowell/ 2019 Bloomberg Finance

The marginal uptick in yields in the fixed income market propelled massive selloff on the equity sector of the Nigerian Stock Exchange (NSE) last week, as the NSE All-Share Index (ASI), and market capitalisation depreciated by 1.66 per cent to close the week at 41,709.09 and N21.819 trillion, respectively.

Similarly, all other indices finished lower with the exception of the NSE Growth Index, which appreciated by 3.26 per cent, while the NSE ASeM Index closed flat.

x

Analysts linked the slowdown in the equity space to the yield improvement recorded in the fixed income space last week.

According to them, this week’s trading sessions would be a mix of bargain-hunting and sustained profit-taking activities, even as the direction of yields in the fixed income market is expected to influence trading given the increase in marginal rates at the OMO auction this week.

The Chief Research Officer, Investdata Consulting Limited, Ambrose Omordion said:

x

“Speculation seems to have slowed down in the equity space, on seeming yield improvement in the fixed income space, as market volatility continues to rise on the general decline of the key performance index and prices of stocks across all capitalisation size and sectors, except for the oil/gas that closed in the green.

“We expect the market to slow down its losing momentum and profits-taking, as bargain-hunters take advantage of the pullbacks to reposition their portfolios ahead of earnings expectations and reaction to numbers that would be unveiled, given that dividend yield remains relatively high.

He added: “The decline in Nigeria’s equity market is, notwithstanding, creating another entry opportunity for discerning investors as the benchmark All-Share index breaks down.

x

“The price corrections or pullbacks have made some of the equities become more attractive for positioning, given the noticeable improvements in their yields.”

Also, analysts at Afrinvest Research said: “The equities market reversed last week’s bullish momentum with sell-offs dominating trades all week. We expect trading sessions to be a mix of bargain hunting and sustained profit-taking activities.

“The direction of yields in the fixed income market would also influence trades especially given the increase in marginal rates at the OMO auction this week.”

x

Analysts at Codros Capital said: “With the moderation in the prices of bellwether stocks this week, we expect savvy investors to take advantage of this and make re-entry ahead of their FY 2020 earnings announcement.

“However, we note that the recent hike in OMO rates by the CBN will continue to stoke uncertainties on the direction of yields, keeping risk-averse investors on the side-lines.

“Thus, we expect zig-zag market performance in the week ahead. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”

x

A review of market performance last week showed that the Nigerian equities market resumed February trading on a bearish note, occasioned by sell-offs in 28 stocks, as the ASI declined by 0.13 per cent.

At the close of trading on Monday, the ASI fell by 54.76 points or 0.13 per cent to close at 42,357.90 points.

Accordingly, investors lost N29 billion in value as market capitalisation dropped to N22.158 trillion.

x

A review of market performance last week showed that the Nigerian equities market resumed February trading on a bearish note, occasioned by sell-offs in 28 stocks, as the ASI declined by 0.13 per cent.

At the close of trading on Monday, the ASI fell by 54.76 points or 0.13 per cent to close at 42,357.90 points.

Accordingly, investors lost N29 billion in value as market capitalisation dropped to N22.158 trillion.

 

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