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Economic Challenges’ll Continue Shaping Investor Sentiments – Analysts

Despite the gains recorded in the equities segment of the Nigerian Stock Exchange last week, analysts have said that the tough economic environment will continue to affect activities in the market.
Equities had on Monday last week halted an eight-session slide before proceeding to close on a positive note for three more trading sessions.
This led the NSE All-Share Index and market capitalisation to rise by 4.18 per cent and close on Friday at 31,441.71 basis points and N10.777tn, respectively, with the other indices closing higher as well, apart from the ASeM Index that closed flat.
This followed the exchange of 2.382 billion shares worth N18.989bn by investors in 19,769 deals across the five sessions.
But analysts, who noted that last week’s rally lost momentum on Friday, said economic challenges remained a problem for the market.
In their market commentary for the week ended August 7, analysts at Vetiva Capital Management Plc said, “Last week’s positive momentum (which was bolstered by news of a new GMD for the NNPC) lost steam in Friday’s session, reinforcing our view that the challenging macroeconomic environment will continue to dominate investor sentiment in the near term. We anticipate sideways trading in the week ahead.”
In the fixed income market, they explained that investors were likely to be attracted to Treasury bills.
The analysts said, “With sustained selling pressure last week, we anticipate investors will take advantage of the higher yield environment in the T-bills market. However, we expect these gains will be short-lived, given the tight system liquidity. With the upcoming bond auction Wednesday, we foresee cautious trading in the bond market.”
Commenting on activities in the week under review, analysts at Meristem Securities Limited noted that earnings releases had continued to filter into the market, though at a slower pace than in the previous week, with the likes of International Breweries Plc and May & Baker Nigeria Plc releasing results during the week.
In terms of dividend payment, Custodian and Allied Plc and Flour Mills of Nigeria Plc declared dividends. While Custodian and Allied declared an interim dividend of six kobo per share, Flour Mills of Nigeria declared a full-year 2015 dividend of N2.10 per share.
According to the Meristem analysts, although most market players believe the perception that the naira is unfairly valued has dissuaded foreign investors from investing, recent developments in the forex market seems to have increased confidence of a resurgence after the appreciation of the currency against the greenback at the parallel market.
They, however, expressed reservations about the sustenance of the gains.
“While recent policies may have resulted in the currency’s resurgence, we are not confident about the sustenance of recent gains,” they said.
“Also, we are not confident that instituted policies will materially change perceptions regarding liquidity in the forex market, which is the primary concern of foreign investors. Also, other headwinds remain prevalent, and so we anticipate that this resurgence might be short-lived.”

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