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‘Trade cautiously’, analysts advise investors

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By Chioma Obinagwam

Investors have been advised to be cautious while trading in equities on Nigerian stock markets.

Analysts at Cordros Capital, a leading financial services group in African markets, made this advice following the ravaging COVID-19 pandemic, with over 4399 cases and 143 deaths recorded in Nigeria according to data mined from the Nigeria Center for Disease Control (NCDC), which has had its attendant consequences on the economy.

“In our opinion, risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions,” it disclosed in its weekly economic and market report.
It further stated that investors should seek trading opportunities in only fundamentally justified stocks.

Confiance News recalls that despite the pandemic and lockdown, the Nigerian Stock Exchange (NSE)- the Nigerian bourse, recorded an uptrend for two consecutive weeks in its key measurement indicators- the NSE All-Share index and Market Capitalisation of listed equities on the exchange.

Precisely, the NSE weekly report for the week ended May 8, 2020 showed that the All-Share Index and Market Capitalisation both appreciated by 4.45 percent to close the week at 24,045.40 and N12.531 trillion respectively.

Extracts from the report also indicated that the NSE ASeM (Alternative Securities Market), depreciated by 0.18 percent within the same period.

An All-Share index tracks the general market movement of all listed equities on the Exchange, including those listed on the Alternative Securities Market and used as a measure of how well the market is performing.

Also reacting to the recent trend in the stock market, Afrinvest, a leading independent investment banking firm with a focus on West Africa, stated that the upswing in the equities market was triggered by bargain hunters seeking low-priced or undervalued stocks.

It also disclosed that investors would be engaged in profit booking in the week under review.

Profit Booking refers to selling a stock that has increased in value so that you actually get (book) the gain.

Confiance News, however, reports that profit booking is not without consequences.

One significant impact is a drop in the prices of stocks, since it leads to an inflow of shares and an outflow of cash.

An incident which has already began in the review period, as the nation’s equities market closed lower at end the of Monday’s trading, impacted by profit booking, resulting in a 0.4 percent to decline in the All Share Index to close at 23,950.83 basis points.

Market Capitalisation of  the listed equities also plunged by the same margin (0.4 percent) to N12.48 trillion.

Confiance News also gathered that the downward trend may spillover through the week under review as investors continue to offload their stocks causing the forces of demand and supply to play out on the stocks, which is a natural phenomenon in any market.

Apart from the decline in the major indicators in the stock market at the close of Monday’s transactions, the NSE All-Share index has already recorded a year-to-date decline of 10.8 percent.  Hence, the need for discerning investors to heed to the recommendations of the analysts by taking positions in fundamentally viable stocks, while the world patiently anticipate the end of the pandemic.

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