Sell-offs Persist Despite Improved Investor Sentiment

Sell-offs in the local bourse persisted in Wednesday’s trading session, dragging the All Share Index 46bps lower to 41,496.25 points while YTD gain contracted to 8.5%. Consequently, market capitalisation decreased by N68.6bn to N14.8tn. Today’s negative performance was largely driven by sell pressures in NESTLE (-2.2%), STANBIC (-4.5%) and WAPCO (-6.6%).  However, market activity improved as volume and value traded inched 22.7% and 44.4% higher to 488.7m units and N5.6bn respectively. AFRINSURE (82.8m), JAPAUL OIL (75.6m) and FIDELITY (63.9m) were the top traded stocks by volume while DANGCEM (N1.1tn), GUARANTY (N886.6m) and NIGERIAN BREWERIES (N867.7m) led the top traded stocks by value.

Bearish Sector Performance
Sector performance was largely bearish as 3 indices closed in the red, 1 closed positive while the other closed flat. The Industrial Goods index led losers, down 2.5% following price depreciation in WAPCO (-6.6%). The Insurance index followed suit, falling 1.9% as MANSARD (-7.4%) and UNITYKAP (-7.7%) recorded losses. The Consumer Goods index also declined, shedding 0.7% largely due to profit taking in NESTLE (-2.2%), NIGERIAN BREWERIES (-0.9%) and PZ (-4.9%). On the flip side, the Banking index gained 0.1% as investors took position in UBA (+4.1%), ZENITH (+1.1%) and GUARANTY (+0.3%). while the Oil & Gas index however closed the day flat.

Investor Sentiment Improves
Investor sentiment measured by market breadth (advance/decline ratio) improved to 0.6x from 0.5x recorded the previous day as 18 stocks advanced against 33 that declined. The best performing stocks today were FIDELITY (+7.8%), GLAXOSMITH (+5.0%) and DANGFLOUR (+5.0%) while CADBURY (-9.6%), UNITYKAP (-9.4%) and MANSARD (-7.4%) were the worst performers.

According to Afrinvest analysts, the sell-offs experienced in the local bourse so far can largely be attributed to profit taking in stocks that had rallied significantly before the beginning of the earnings season as well as contagion effect of the rout in equities across global markets. With investors sceptical of forward earnings vis-à-vis elevated valuations, sentiment has turned bearish in recent trading sessions. We believe declining level of valuation has presented investors with attractive entry opportunity; hence, we expect a reversal of the bearish trend in the near term.