Nigeria’s stock market would trade horizontally this July until second-quarter earnings are released
Stock investors in Nigeria who are positioning for high yields in the second half (H2) of the year are keenly waiting for listed companies’ half-year earnings to further guide their decisions.
The broader equities market has remained on a bearish trajectory in recent times as investors walk cautiously on Custom Street Lagos following persisting political uncertainties and insecurity in Africa’s largest economy.
While persisting uncertainty in the economy depresses investor sentiments, some stocks in the market are still priced below their target prices, thereby offering attractive entry opportunities for value hunters.
The Bismarck Rewane-led analysts at Lagos-based Financial Derivatives Company (FDC) said in their July 6 presentation at Lagos Business School Breakfast Session that Nigeria’s stock market would trade horizontally this July until second-quarter earnings are released.
They said in their equities market outlook for July that short-term sell-off and long-term value would come to play, adding that institutional investors would rebalance their portfolio for attractive fixed income yields.
While acknowledging that all investors’ eyes are on H1 2022 corporate results season, the analysts noted that second-quarter performance of listed companies would capture the effect of electricity challenges, foreign exchange crisis and political uncertainties.
“Inflationary pressures and heightened borrowing cost to hit the top and bottom-line performance. Corporates are expected to build up inventory to hedge against spike in global commodities prices. Rally is confined to sectors that are not politically sensitive. Growth in NGX to depend on sectors’ level of consolidation. Investors are expected to trade cautiously as political uncertainties and insecurity issues persist,” FDC analysts said.
As other stock markets struggle year-to-date, the Nigerian bourse outperformed its peers with a record positive return of 22.24 percent as of Friday, beating inflation. On Friday, the National Bureau of Statistics released the Consumer Price Index report for June which showed that the inflation rate hit a five-year high of 18.60 percent.
