By Udeme Ekwere

Tuesday, 1 Feb 2011

Analysts have predicted that there will be significant improvement in major market indicators towards the end of this week.

This follows the losses recorded in the equity market the previous week, due to profit taking activities of investors.

Market indicators had been on the upward trend since the beginning of the year, with the Nigerian Stock Exchange’s All-Share Index and the market capitalisation of listed equities recording significant increases.

However, as from Tuesday last week, the indicators began to lose points. The NSE’s All-Share Index stood at 27,797.39 points, shedding 440.80 points or 1.6 per cent to close on Friday, at 27,356.59 points.

Similarly, the market capitalisation fell by N141bn or 1.6 per cent from N8.88tn to close at N8.88tn.

The consistent decline was traced to the liquidity squeeze induced by the sale of treasury bills by the Central Bank of Nigeria last week, as well as the profit taking activities of investors.

In its weekly report obtained by our correspondent on Monday, FSDH Securities Limited noted that investors would begin to take position in the market by the end of the week.

This, according to them, will lead to significant appreciation in activities in the market.

They said, “We expect that investors will take advantage of the low prices in the market this week, therefore leading to appreciation in the index to end the week. Investors should take medium-to-long term positions in the stocks that have good fundamentals rather than investing for speculations.

“We note that there are select opportunities in the banking, building materials, food and beverages, conglomerates and petroleum marketing subsectors of the market.”

The analysts also predicted an increase in inter-bank rates this week, adding that the decision by the Monetary Policy Committee to raise rates might cause some tightness in the market.

They said, “We do not expect any maturity in the coming week. However, we expect that the market will be tight as a result of the MPC’s decision to raise the Cash Reserve Ratio and the Liquidity Ratio by 100 basis points and 500 basis points respectively.

“Also there will be withdrawal in the market from the sales of foreign exchange during the week. We therefore expect that inter-bank rates should go up further in the coming week.”

The report noted that there was no risk to the country’s external position in the medium term.

“In addition, we are of the opinion that the current fiscal position of the Federal Government should not exert excessive demand pressure on the foreign exchange. Thus we expect the foreign exchange rate to remain stable in the short to medium term,” it added.

Source: Punch