Investment analysts at Bancorp Securities Limited, one of Nigeria’s frontline investment research and consulting firms, have projected that sentiments in the Nigerian Exchange (NGX) trading sessions will be marginally positive this week amid micro and macroeconomic whirlwinds in the economy.
The analysts, in the firm’s ‘Weekly Stock Recommendations: Jan 15 – Jan 19 2024’ report, circulated to our correspondent on Monday, hinged their forecast on bright prospects of the Banking and Services sectors’ stocks among other fundamentals.
The investment experts stated: “In this current week, we expect the Nigerian bourse to positive, albeit marginal with major expectation for profit taking in assets with unprecedented annual capital gains and perhaps , comparative weaker fundamentals.
“Positive sentiments in the banking sub sector are expected to continue, although we expect minor corrections which may not change the tide of current momentum. Services sector stocks with good assets and appreciable entry prices, are expected to pick up and/or sustain momentum during the course of the week”, they added.
According to them, the decline in purchasing power is triggered by hikes in transportation costs, real estate cost spikes, increase in cost of healthcare services, amongst others.
On the general outlook of the economy, the experts noted that while the domestic economy was being reshaped through policy reforms, concerns around sustained inflation abounded, in anticipation of the December 2023 inflation report.
They projected a higher but milder intensity of inflation rate in December 2023, primarily due to the gains recorded in the period, in the foreign exchange market, wherein the intermittent advantage of reduced FX backlogs, provided appreciable liquidity in the market, wherein the Naira appreciated temporarily.
In addition, the Bancorp Securities’ analysts also based their inflation rate projection on the bullish run on the Nigerian equities market, which served to enhance liquidity on the bourse, spurred further by the declining NTB yields for the month of December 2023.
According to the researchers, a major impact of these developments is to mop up excess liquidity in the system, as a way of tackling cost side inflation inherent in the domestic economy.
They recalled that last week, the Nigerian bourse extended the upward trend line, as the NGXASI closed up, returning 4.24% w/w whilst closing on 83,042.96 points.
Specifically, the experts highlighted that key indices on this performance as including the double-digit YTD returns of 11.06% in the second week of trading of the year 2024, comparative decline in market breadth to 1.76x on a week-on-week basis, and growth in trade parameters, where in volume and value traded increased by 72.25% and 112.74% respectively on a week-on-week basis.
