A rally by the stock market in December has helped the equities market to defy seasonality, analysts at Meristem Securities Limited have said.

According to the Chief Executive Officer, Lambert Trust and Investments Limited, Mr. David Adonri, the equities market often declines in the fourth quarter of the year for a number of reasons.

He said, “There are several factors that usually depress the equities market in the fourth quarter. For instance, a lot of people exit the market to raise money for festivities and to pay school fees in the coming year.”

He, however, explained that in recent times, due to the dominance of foreign investors and institutional investors, that pattern has changed as the market is driven more now by the fundamentals of the quoted companies.

“That means that if the third quarter results of the companies are impressive, they will elicit demand that will likely compensate for the retail flow,” he added.

In their investment guide for December 27, analysts at Meristem observed that the rally in December was on the back of profit-taking and position-taking against January. This, they said, led to a 3.37 per cent month-to-date return, which pegged year-to-date returns at 43.28 per cent.

They added that with the exception of the Consumer Goods sector, which fell by 3.05 per cent, all sectors posted positive returns.

For instance, they said the Conglomerates, Banking, Agriculture, Insurance and Oil and Gas sectors posted 5.04 per cent, 3.03 per cent, 2.66 per cent, 3.98 per cent and 2.91 per cent, respectively.

“With reference to our investment guide published on December 2 2013, some stocks that have consistently posted impressive returns in December were identified. So far, nine of 17 stocks identified have returned in excess of the market while six have posted negative returns MtD,” they said.

According to them, a sectoral breakdown of performance in 2013 using Meri-Index, shows that the Agricultural sector posted the highest return with 112.36 per cent gain YtD, while the Conglomerates , Industrial Goods and Health sectors  posted 88.31 per cent, 65.84 per cent and 50.39 per cent in that order.

Source: Punch (by Simon Ejembi)