By Udeme Ekwere

Monday, 17 Jan 2011

With the sustained increase recorded in activities at the Nigerian capital market, analysts have said there may be some level of profit taking this week.

Since the close of equity trading activities last Monday, major market indicators of the Nigerian Stock Exchange have continued on an upward trend.

Specifically, the market capitalisation of the listed equities, which stood at N8.306tn last Monday, closed at N8.711tn on Friday. This represents an increase of N405bn or 4.9 per cent.

Similarly, the NSE’s All-Share Index rose by 1268.53 basis points or 4.9 per cent to close the week at 27,267.17 points, up from 25,998.64 recorded early last week.

The daily volume of shares traded during the week averaged 621.66 million, which showed a 17.2 per cent rise compared with 530.35 million exchanged the preceding week.

The appreciation in the market had been traced by market analysts to the renewed interest of investors in market activities.

According to them, the purchase of the toxic assets of banks by the Asset Management Corporation of Nigeria had come as a breather to investors who had displayed lack of enthusiasm in the market following the Central Bank of Nigeria’s August 14, 2009 pronouncement.

However, with the significant gains recorded in the last few days, analysts predict that this week may be characterised by profit-taking.

For instance, analysts at Vetiva Capital Managment Limited, noted that speculative investors might begin to take advantage of the marginal increases in their share prices.

They said that it was not unusual for investors with short-term investing plan to cash in on the appreciation recorded by some of the shares since the beginning of the year.

In their summary for the week ended January 14, 2011, they said, “Having sustained a two-week rally, we anticipate that investors would begin to lock in profits on some positions. Nevertheless, we believe that the impact on the benchmark index would be marginal as some counters are likely to form new support level.”

On their own part, analysts at Meristem Securities Limited, headed by the Managing Director, Mr. Wole Abegunde, stated in their report for the week ended January 14, 2010, that with the expected full-year results of companies, there might be some issues with sustainability of the bullish trend.

They said, “As the full year earnings season continues to draw closer, the sustainability of the market tempo will be put to test. We, however, see sustained performance for companies that are able to deliver superior growth relative to peers as these remain a yardstick for gauging stock performance in the long run.”

Source: Punch