- More investors to move resources from money market to capital market
The Nigerian equity market for almost four straight weeks had been bullish and this has resulted in total recovery of the market from negative returns to the positive as it returns 5.86% year to date.
The current positive vibration in the market can be linked to the cut in the Monetary Policy Rate to 11.5% from 12.5% which led to low yield in the money market. Respecting the circular flow of income, investors had no other option than the capital market. At that, Pension Funds Administrators (PFAs), Institutional investors and High Net worth Investors are moving their resources from low yield market to where bargain hunting is feasible. The restrictions of players in OMO Auctions also forced PFAs to look for Capital Market for a better returns.
Foreign Portfolio Investors (FPIs) have their funds hooked, especially their dividends and they are taking positions in stocks pending when situations favourable for repatriation of funds is possible. The difficulty to get FX by the Foreign Investors also compels them to play the market rather than keep waiting to get FX for outflow.
The rising inflation to 13.22% has forced many investors to hedge against inflation and capital market becomes a better alternative.
The 12-day rally that started precisely from 18th of September 2020 was halted on the 7th of October 2020 due profit. Even though the market has declined for three straight days after the 12 straight bulls, the market still returned 5.30% week on week and 5.86% year to date.
Should we expect more bulls or is the party over?
According to Aruna Kebira, Chief Dealer of Global View Capital Limited, “The party is far from being over. My believe is that the bull have been for a very long time, so people need to book profit. Remember that some people may still be holding Zenith at N10.70, N13.50, 14.50 and 15.00. So they need to book that profit first and watch what happens to the market. The volume that is still coming till still signifies that the bulls are here. The fillers that is getting into the market is that low returns on money market instrument will push more investors to the capital market. An aggregate of investors that will want to move their resources from the money market to the capital market is going to cause another rally. As far as the rate in the money market is as low as we are experiencing, the capital market will be up. Yes, there may be pull back or what we call market correction; but that is not the end of the bulls. On Thursday and Friday, if not that Dangote Cement dropped, the market would have been positive. Overall, the market still returned positive (over 5%) week on week.
Market closing lower on Friday is not an issue, it’s just a normal weekend effect. Activities may not be upbeat on Monday. If it however start on Monday, then the bull can do like three days in a week. I’m not expecting the bull to return fully on Monday but the market might trade in a balanced level. People are cautious now, though the volumes are there which is obvious. From Tuesday people will be more adventurous to push the market up.
For FBNH, ACCESS and UBA, we have not seen the last of their rally. It was on Tuesday that FBNH began to rally, because while Zenith and Guaranty were on rally, FBNH, ACCESS AND UBA did not rally much. When the bull picked them up on Tuesday, that’s when they were able to rally. I’m not sure that they have done more than 15% since that rally has come. I don’t think the bull is done with FBNH, ACCESS and UBA at all.
FBNH
The big elephant at the close of trade in December 31, 2020 closed at N6.15. It is currently trading at N6.20 which translate to a growth of 0.81% year to date. In the last 52 weeks, the share price of FBNH has touched a high of N7.85 and N3.60.
It is 72.2% above its year low of N3.60 and 21.02% away from its year high of N7.85. A position in FBNH has an uptrend potential of 21.02% relative to its year high of N7.85.
On the technical chart, a BUY recommendation is indicated for FBNH by RSI, MACD and Williams %R.
Access Bank
Access Bank during the rally reached N8.05 and closed at N7.80 on Friday. What the market is telling us is that the level to which they would have gone like Guaranty touching N33, Zenith touching N22, Access touching N8.00, UBA touching N7.00 is telling you that there is a possibility of them returning back to those prices and making it there support level going forward.
The share price of Access Bank has a 52 weeks high of N12.00 and 52 weeks of N5.30. At N7.80, the bank is trading 47.17% above its year low of N5.30 and 35% away from its year high of N12. A position in Access Bank has an uptrend potential of 35%.
On the technical chart, a BUY recommendation is indicated for Access Bank by RSI, Stochastic and MACD.
The acquisitions the bank is doing is helping them seriously. This news of Herbert Wigwe selling and buying back is a big indication that that stock will surprise people at Q4. They have something in store to shock investors.
Guaranty Trust Bank
The share price of Guaranty Trust Bank went as far as N33 in the recent rally but closed at N30.4. There is this market sentiment that favours Guaranty ahead of others. Foreign Investors, PFAs, general investors and high net worth individuals hit Guaranty Trust Bank first before they pick any other stocks. The money flow in Guaranty is higher than money flow in Zenith Bank.
In the last 52 weeks, the share price of Guaranty Trust Bank has touched a high of N34.4 and a low of N16.70. The bank is trading 82.04% above its year low of N16.70 and 11.63% away from its year high of N34.40.
On the technical chart, Williams %R and Stochastic RSI indicate that the stock is oversold, which suggest that Guaranty Trust Bank is trading below its true value, and it has uptrend potential. MACD also indicates a BUY for Guaranty Trust Bank.
Zenith Bank
Zenith Bank touched N22 last week but eventually closed the week at N20. Recall that some who bought Zenith at N10.70, N13.50, 14.50 and 15.00 will obviously take their profit and that explains the reason for the drop in price to N20.
In terms of capital appreciation, Zenith Bank gives the highest yield more than Guaranty Trust Bank in terms of capital appreciation. For instance, if you buy Zenith at N16 and its now N20; it has more capital appreciation than when you buy Guaranty at may be N28 and its now N30.
It the last 52 weeks the share price of Zenith Bank has touched a high of N23 and a low of N10.70. At the current share price of N20, Zenith is trading 86.92% above its year low of N10.70 and 13.04% away from its year high of N23.
Stochastic RSI indicates that Zenith Bank is oversold and this implies the stock is trading below its intrinsic value. At that, a position in Zenith Bank has an uptrend potential. RSI and MACD both indicated a BUY recommendation for Zenith Bank.
UBA
The share price of UBA last week touched N7 but eventually closed at N6.80. UBA in the last 52 weeks has reached a high of N9.25 and a low of N4.40. The Bank is trading 54.55% above its year low of N4.40 and 26.49% away from its year high of N9.25. At that, a position in UBA has an uptrend potential of 26.49%.
On the technical chart, a BUY recommendation for UBA is indicated by RSI, Williams %R and MACD.
MTN
MTN has actually been paying good dividend. MTN has risen above its January 2nd price. As at January MTN was N105. Currently trading at N140.5, MTN is 1.54% away from its year high of N142.7. Using it’s year high as a yardstick, caution is needed because the current price is almost touching its 52 weeks high of N142.7.
On the technical chart, a BUY recommendation is indicated for MTN by RSI, Stochastic, MACD and Williams %R.
Airtel
Airtel is currently trading at a 52 weeks high of N410.2. Year to date, the share price of Airtel has grown by 37.24% from a year low of N298.9 at the beginning of the year.
As far as Airtel is a telecommunication outfit who made more money during lockdown than they are even making now, they will to be affected in any way by current economic reality. During lockdown, people were not going anywhere. When you are idle you talk more. Now we are using Zoom; and the more you use zoom, the more you use data. Bank transfers, internet banking and phone calls consumes data.
Airtel do not have much volatility like MTN because there are lot of times it traded flat week on week.
On the technical chart, a SELL recommendation is indicated for Airtel by Stochastic and Williams %R, though MACD gave a BUY recommendation.
Dangote Cement
Dangote Cement went as far as N158 last week and closed at N150 on Friday. There one thing that investors always have in mind, the result. Remember that Dangote Cement did not really make good outing in their Q4’19 result, but they went ahead and pay N16 dividend from reserve. That gesture is at the back of the investors’ mind.
In the past 52 weeks, the share price of Dangote Cement has touched a high of N180.40 and a low of N116. At the current share price of N150, Dangote Cement is trading 29.31% above its year low and 16.67% away from its year high of N180.40. At that, a position in Dangote Cement has an uptrend potential of 16.67%, relative to its year high of N180.40.
On the technical chart, stochastic and MACD gave a BUY recommendation for Dangote Cement.
BUA Cement
When BUA merged with CCNN, they delisted it at about N20 plus and listed it back at N35 and it went to N40. Currently trading at N41.5, the share price of BUA Cement is very close to its 52 weeks high of N44. That is why investors are very cautious of the stock at the moment.
Going by its fundamentals, what can move BUA Cement further now is there performance and the dividend they are going to declare at Q4.
However on the technical chart, a BUY recommendation is indicated for BUA Cement by RSI, Stochastic RSI and MACD.
WAPCO
For almost 2 or 3 years, WAPCO was paying dividend from there pioneer profit. WAPCO did right issue and pay dividend from the proceeds of the right issue. They did rights at N42 and came back the next year to do another rights at N12.50. The share price of WAPCO used to be N105, N110 and came down as low as about N8.95.
Wapco is currently trading at N17, which is 89.94% above its 52 weeks low of N8.95 and 4.76% away from its year high of N17.85.
On the technical chart, a BUY recommendation is indicated for Wapco by RSI, Stochastic, MACD and Williams %R.