Bears return to stock market as Q1 earning season nears end

Investors lose N416bn

By Nkiruka Nnorom

The end of the first quarter 2021, Q1’21, earnings season as well as investors’ profit booking may have combined to reinstate bearish positions in the stock market.

The bears had receded in April on the heels of surprising positive corporate performance for the Q1’21 announcements but reared their head previous week as the tempo of the earnings announcements wears down.

According to market analysts henceforth, investors would adopt an unsteady posture in the market as the end of the period for the release of Q1’21 earnings approaches.

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This is comes against the backdrop of N416 billion loss to investors last week in the wake of the renewed bearish sentiments while they (investors) took full advantage of the gains over the last two weeks to book profit on bellwether stocks.

Analysis of activities in the market showed that with the exception of the last trading day of the week, the local bourse recorded losses in all of the week’s four trading sessions. Accordingly, the All Share Index (ASI) nosedived by 1.6 percent to close at 39,198.75 points, while the year-to-year (YTD) returns moderated to -2.7 percent.

Similarly, the market capitalisation of all listed equities declined by 1.99 percent to close at N20.431 trillion, resulting in N416 billion loss to investors.

Profit-taking in Stanbic IBTC Holdings (-6.0%), MTN Communication Nigeria (-4.1%), Guaranty Trust Bank (-2.8%), and Dangote Cement Plc (-2.5%) drove the weekly loss.

However, activity levels were mixed, as trading volumes declined by -3.8 percent, while value traded rose by 41.8 percent to 1.419 billion units and N15.918 billion respectively.

Sectoral performance was mixed as the oil and gas (+5.3%), consumer goods (+0.6%), and banking (+0.6%) sectors recorded gains. On the flip side, the insurance and industrial goods sectors depreciated by 2.2 percent and 1.6 percent respectively.

In their projections for the week, analysts at Cordros Capital,  a Lagos-based investment banking firm, said: “With the Q1’21 earnings season now out of the way, we believe a “choppy theme” will be the order of the day as investors keep their gaze on yield movements in the fixed income market.

“The bears will likely maintain dominance as the absence of positive triggers will limit buying interest from the bulls.  “Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”

Also commenting, analysts at Cowry Asset Management, said: “We expect the market to trade sideways as investors remain on the look out for new stop rates,  especially for 364-day bills.

“Hence, bargain hunters can seize the opportunity to position in dividend paying stocks,  particularly those that offer above 10 percent dividend yield.”

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