Ruth Ibikunle
The stock market on Monday closed lower by 0.09%. Year to date, the market has returned 36.41% with the All Share Index and Market Capitalisation at 101,995.21 points and N55.811 trillion.
In a stock market review with the MD/CEO of GlobalView Capital Limited, Aruna Kebira, the following were discussed:
Excerpts:
• The stock market last week closed on a bearish note, shedding 3.44%. It continued its downtrend on Monday with a decline of 0.09%. What is the outlook for the week?
The market is passing through a turbulent phase that is characterized by non-market-friendly activities by the government.
To stem inflation and to address the shortfall in the supply of dollars, the current government is aggressive on so many fronts.
On Wednesday, February 14, the DMO auctioned T-bills up to N1trillion, the 364 rates closed at 19%
On Monday and Tuesday, February 19 and 20, 2024, the DMO auctioned 8 years of bonds up to N1.5 trillion with a stop rate of 19%.
If you reason that 19% for a 364-day instrument might not amount to something tangible and also that the returns are below the inflation rate, what about locking up your investment for 8 years at 19%? That is quite massive and a lot of investors would do that because they know that these rates cannot be sustained into the future and when the rates begin to come down, their investments would be seriously in the money.
While these activities are taking their toll on the market, the CBN scheduled its MPC meeting for February 26 and 27.
The market believed that with the current height in the inflation reading, the CBN has no other option than to tinker with the MPR with an upward review.
Moreso, this is the first MPC meeting in eight months and the first the current CBN governor would be chairing
All these and all other not-too-market-friendly news are hanging over the market and are causing the broodiness noticed in the market that has led to the admittance of the bears on the floor of the NGX.
If there is going to be any significant change in the direction of the market, it is largely dependent on the outcome of the MPC meeting later today.
A lot of monetary tightening is being considered by the CBN but to what extent these are done would determine where the pendulum of the market would swing.
• What is driving the current rally in FBNH? Is it a good BUY at N34?
The current gyration in the price of FBNH is a reflection of the antecedents of the current director on the board of the bank.
Whether we like it or not, Mr. Otedola who is currently the chairman of the bank has distinguished himself in the board politics of quoted companies and has always emerged with his head and shoulders high.
The market believes that his chairmanship of the bank is going to bring good fortune and turn-around for the institution and investors are jostling to have a piece of the action expected from him.
That is why while all other banking stocks are looking down, FBNH is breaking its 52-week high price.
As per whether the stock is a good buy at N34.00. Any stock price that has the name of Otedola attached to it does not have a cap. We saw it in FO, we’re currently witnessing it in Geregu and that feat may be replicated in FBNH. Those who have the appetite and the ability to take that risk should queue up behind him and enjoy the largesse or the regret that would come from it
• PZ has announced that it will soon be delisting. What is the fate of existing shareholders?
When a company is leaving the NGX by way of delisting, the interest of the minority shareholder is determined in the scheme of arrangement documents.
The delisting price is what the investors who currently have a position in the company’s stock would get at the end of the day.
After that, the company becomes a private company.
• Inflation rate has risen to 29.90% according to NBS. How will this impact capital market participation?
In as far as the supply side of the economy is deficient, and the dollar rate is trending up, rising inflation is inevitable.
There is an acute food supply, farmers can no longer go to the farm, the little they can take out of the farm, no infrastructure to take them to the cities, and where you have good and motorable roads, kidnappers abound.
The dollar supply into the coffers of the government had been restrained by the inability of the government to meet with OPEC-approved daily quota of crude coupled with grand oil theft in the Niger Delta creeks.
All these issues aggregate to continue to push inflation higher and higher.
Because the supply of basic and bare necessities is low, it now becomes the seller market. Every associated cost in the value chain has been conveniently shifted to the final consumer in the form of a higher price.
Well, the CBN is trying to attack that through contractionary monetary policy, but that may be in the short term.
What the economy needs is CBN’s intervention in agriculture, and security both in the farms and the creeks.
• Nigeria’s GDP by 3.46% in Q4 2023 according to NBS. Is this figure a reflection of the current economic realities?
I have always argued this, if the NBS comes out with an inflation reading, we believe that they understated it and if they now announce the GDP figure and it is robust, we believe that they overstated it.
If you can trust them about the Inflation figure, why can’t you trust them with the GDP figure?
In the calculation of the GDP, price is a part of the equation and an increase in the price of commodities can also affect the outcome of the equation, so I don’t see anything technically wrong with the GDP reading.
• What are the possibilities in Access, Fidson, Honeywell, Nigerian Breweries, and Flour Mills?
These stocks are currently trending down, and they can bottom out at any time.
Dry bones must always rise gain and at the turn of the market especially when the earnings begin to tumble in, the fortune of these stocks will take a new turn.
• What are the stocks to watch?
FBNH, Nascon, Dangote Sugar, Japaulgold, Transcorp, Tantalizers, and a host of others