Shun market noise and focus on companies’ fundamentals, analysts advise investors

As equities dip 0.32% to hit 52-week low

THE PERVASIVE DAMPENED mood at Nigeria’s equities market, analysts in some quarters have advised investors to pay keen attention to company fundamentals rather than on general impression in the market, which they tagged as noise.

This came as the market ended another week bearish amidst continued investor apathy and a lack of positive catalysts which brought the market value to 52-week low last week.

The All Share Index (ASI) shed 85.16 points or 0.32 per cent to settle lower at 26,448.62 points to end the week. This, in monetary value, represents a loss of N42 billion in market capitalization which also closed the week on the red at N12.875 billion.

Consequently, the month-to-date (MTD) and year-to-date (YTD) returns worsened to -4.3 per cent and -15.9 per cent respectively.

In a bid to provide guide for the investing community, analysts have noted that the movement of share prices in the market has not really impacted negatively on performance companies with sound fundamentals, such as earnings, revenue, dividend and asset.

Already, analysts at Cordros Capital have stated repeatedly in their weekly research that the trend witnessed through the year is likely to persist through the final quarter of the year, although expecting pockets of gains over the final months of the year as fund and portfolio managers realign portfolios prior to the start of 2020.

“Nonetheless, we note that valuations remain attractive driven by price deterioration throughout the year. Hence, we advise that long-term investors consider appropriately timed investments.”

Reacting to the market situation, Adebayo Adeleke, the chairman of Independent Shareholders Association of Nigeria (ISAN), noted that despite the pervasive price deterioration being experienced, company fundamental has refused to follow suit.

He said, “What I think the investors should do is to move away from the noise of the market and look at the fundamentals. Our economy is far from being efficient and so is the market and that is why a company that gains 10 per cent today will close tomorrow shedding 10 points.

“The company fundamentals do not just change like that. No company will gain 10 per cent in its asset value in a day, and no company loses 10 per cent of its asset value in a day.”

According to him, some of the companies whose shares are falling in the market have posted good report, and even some have come with interim dividends.

Market observers have also said foreign investors are expected to troop in to the market towards the close of the year when they will be taking advantage of low prices to enter the market.

Analysts noted that with the relatively stable exchange rate, the situation is to the advantage of foreign investors who will come back to buy at N4 the same shares they traded off at N14, without negative impact from the exchange rate.

On the flip side, Adeleke said retail investors are the ones bearing the brunt of the negative sentiments in the market, adding: “the retail investors are losing a lot of money because they are already locked up in the market and now, there is no liquidity to enable take advantage of the situation.

Meanwhile, as the another week closed on red, statistics from the Nigerian Stock Exchange shows that sustained selloffs across tier 1 banks dragged the banking index to a 2.0 per cent loss; the Industrial Goods closed with -0.3 per cent change and Oil & Gas shed 0.2 per cent points.

Conversely, the Insurance index gained 2.4 per cent to resume its upward trend, following a break in its 3-week gaining streak in the previous week, while the Consumer Goods advanced by 0.1 per cent.

A total turnover of 896.610 million shares worth N16.561 billion in 12,638 deals were traded during the week by investors in contrast to a total of 1.409 billion shares valued at N31.959 billion that exchanged hands the previous week in 13,616 deals.

NSE data also showed that the financial services industry, measured by volume, led the activity chart with 597.154 million shares valued at N6.721 billion traded in 7,197 deals; thus contributing 66.60 per cent and 40.58 per cent to the total equity turnover volume and value respectively.

The consumer goods industry followed with 102.130 million shares worth N7.214 billion in 2,027 deals, while the third place was service industry with a turnover of 84.001 million shares valued at N377,017 million in 264 deals.

Trading in the top three equities namely, Guaranty Trust Bank Plc, Global Spectrum Energy Services Plc and Flour Mills Nigeria Plc., measured by volume, accounted for 302.285 million shares worth N5.510 billion in 1,290 deals, contributing 33.71 per cent and 33.27 per cent to the total equity turnover volume and value respectively.