Capital market analysts have expressed confidence that the Nigerian stock market will recover from its recent selloff, citing improving valuations, expected half-year corporate earnings and renewed investor interest in fundamentally strong stocks.
The optimism follows a bearish week on the Nigerian Exchange Ltd. (NGX), during which investors lost N5.643 trillion as widespread profit-taking and portfolio rebalancing weighed on share prices.
The NGX All-Share Index declined by 3.59 per cent to close at 235,941.27 points from 244,738.74 points recorded in the previous week. Market capitalisation also fell to N151.327 trillion from N156.970 trillion.
Market analysts attributed the downturn largely to profit-taking after months of sustained gains, as well as a shift of funds into fixed-income instruments offering attractive yields.
Mr Umaru Mathew, Head of Capital Market, Commodities and Dealers at Equity Capital Solutions Ltd., described the decline as a healthy correction rather than a sign of weakening market fundamentals.
According to him, investors had priced in strong earnings expectations for the banking sector, but results released by some lenders failed to fully meet market projections, triggering profit-taking activities.
“The market is undergoing a natural adjustment after a prolonged rally. While some investors have moved to the money market because of attractive yields, several fundamentally strong stocks remain undervalued and attractive,” he said.
Mathew dismissed suggestions that the market weakness was primarily linked to the migration to the T+1 settlement cycle, noting that investor sentiment and market dynamics remained the key drivers of price movements.
He projected that the market could begin stabilising within the next two weeks as prices approach support levels and investors position for second-quarter and half-year earnings releases.
Similarly, Mr Aruna Kebira, Managing Director of Globalview Capital Ltd., said investors were increasingly reserving liquidity ahead of the anticipated public offer of the Dangote Refinery.
According to him, the combination of attractive money market yields and preparations for the expected offer has encouraged some investors to temporarily reduce exposure to equities.
Despite the current pressure, Kebira said stronger corporate earnings could trigger renewed buying interest and support a market rebound.
Trading activity remained robust during the week, with investors exchanging 3.075 billion shares valued at N254.614 billion in 287,157 deals. Although volume declined from the previous week’s 4.964 billion shares, the value of transactions increased, indicating sustained investor participation.
The Financial Services Industry dominated trading, accounting for 67.44 per cent of total volume traded, led by Access Holdings Plc, Sterling Financial Holdings Company Plc and Jaiz Bank Plc.
Market breadth remained negative as 78 equities declined against 11 gainers, reflecting broad-based selling pressure.
Analysts, however, maintain that the correction could create buying opportunities for long-term investors as the market enters the earnings season, a period traditionally associated with renewed portfolio positioning and improved sentiment.