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NGX’s Market Surge: Analysts Warn Of Possible Pullback Amid N6.29trn Gain

January 22, 2024
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NGX ASI Further Drops By 0.67%, As BUA Cement, Eterna Among Top Losers


Analysts have warned about a possible pullback as the NGX’s market capitalization soars by N6.29 trillion, recording a 13.84% week-on-week gain.

Experts caution that the bullish run may be sentiment-driven, not backed by robust economic fundamentals.

Cowry Asset Management’s analysts suggest an imminent correction, with stock valuations surpassing intrinsic values. Highcap Securities’ David Adonri notes the market’s exuberance, driven more by sentiment than economic realities, expressing hope for an orderly correction.

READ ALSO: NGX Surges To Record Weekly High With 13.8% Gain, Crossing N51trn Market Cap Milestone

He said: “The secondary market for equities, which started its bull run last year, has continued with undiminished intensity. The boom has principally been propelled by sentiment rather than sound economic fundamentals. As a result, when realities of the economy dawn on the market, which may occur as dividend payouts fall below expectations in due course, perhaps correction may set in to expunge current exuberance.”

Akeem Oyewale of Marble Capital highlights a re-rating of the ASI, emphasizing the need for a realistic view once audited financials are released. ARM Securities’ Rotimi Olubi agrees on the overbought status, seeing a pullback as an opportunity for smart investors.

Despite last week’s bullish momentum, analysts observe weakening participation levels. The Industrial index leads gains, while the banking index retreats. Positive movements in insurance, oil & gas, and consumer goods sectors contrast with declining total traded volume and value.

However, the Nigerian Stock Exchange experiences heightened optimism, but experts warn of a potential market correction driven by concerns of overvaluation and sentiment-driven trading.

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Emmanuel Ochayi
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Emmanuel Ochayi

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