Rising bond yields are likely to increase pressure on Nigerian and US equity markets


The Nigerian stock market appears to have fallen victim to its own success. The All Share Index in 2020 became the index with the best performance in the world with a plus of + 50.03%.

The Nigerian stock market is reversing some of January gains driven by factors such as continued local participation, positive sentiment on vaccine distribution despite the reported spike and new strains of the COVID-19 virus, and the prospect of low fixed income returns could stay, have been driven for longer.

Taken together, the market rose 5.3% in January.

However, given the mixed signal from the bond market, sentiment appears to have reversed that yields may rise faster than expected following the outcome of the last OMO and NTB auctions held by the CBN. “ said Abiodun Keripe, Chief Executive Officer, Afrinvest research.

READ: Macro Weakness: Justification for Cheap Nigerian Stocks?

Again, the slow distribution of vaccines with an increased number of cases is of concern both globally and locally. “As a result, stocks are down 4.7% since the beginning of the month in February,” the Investment banker based in Lagos added.

It came as no surprise that such a position drew the attention of various categories of investors who obviously want a piece of the pie. However, these expectations are limited in the short term.

“A high percentage of the results published so far have not been particularly impressive.” said Adetayo Teluwo, a scholar at Warwick Business School.

Investors are aware of the impact of the current economic climate on multiple sectors and choose to reduce losses across portfolios. As a result, immediate profit-taking has been given priority over delayed capital appreciation.

READ: Record sales in Nigerian mid and small cap stocks persist

T.The current bearish trend in the Nigerian stock market was caused by the widespread profit taking activity that had begun in the past three weeks.

“The impressive earnings reports from companies like AXA Mansard, TOTAL, and a few others, despite the impact of Covid19, drove their respective share prices up over the past year, and traders are sticking to their profits, making for marksand the feelings of being in the red ” said Darlington Morsi Help, a Forbes Accelerator Cohort ’20 and founder of Quba Exchange.

“Sell-offs would guarantee the right pricing for investors seeking hefty dividends on higher volumes.

“Investors will be able to buy the same target stocks at lower prices before getting back into the dividend industry.” Adetayo added.

READ: Slump in domestic bill and bond yields forces local funds to move into stocks

Investor confidence has recently been affected by some adverse regulatory shocks. The constant sell-offs and price declines continue in the hands of investors who prefer prop up the investor stocks in their portfolio. Silent, aggressive onThe accumulation of insurance portfolios with off-the-radar vehicles also contributes to this.

Keripe said that given the wall of liquidity in the Market, Some investors stood on the sidelines waiting for some correction.

“It is not beyond foreign investors to deposit large quantities of shares to open the gates to hungry bears.” says Adetayo.

READ: US stocks close lower as Facebook, Amazon, and Google drop 2%

The Be Still relatively undervalued, at 15.3x the price / earnings ratio of some of their global and BRICS counterparts, Nigerian stocks are now an entry point for investors who have been waiting for a correction.

“However, Expectations for corporate earnings and dividend prospects remain positive, especially for companies operating in resilient economic sectors (telecommunications, Banking & Agriculture) we believe this would help the market. “ K.rescue added.

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