‘Allow stocks to come down to support level, then take position to ride with the tide’- Kebira

The market last week opened for four trading days as the Federal Government of Nigeria declared Friday 2nd April 2021 (Good Friday) and Monday 5th April 2021 (Easter Monday) public holidays to commemorate the 2021 Easter celebrations.

Despite various earnings release and dividend declared by quoted firms last week, trading activities still closed on a bearish note as the NSE All Share Index and Market Capitalization depreciated by 0.76% to close the week at 38,916.74 and N20.361 trillion respectively.

An aggregate of 1.445 billion units of shares, valued at N19.039 billion in 17,400 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 1.530 billion shares valued at N21.311 billion that exchanged hands last week in 20,016 deals.

The Financial Services Industry led the activity chart with 1.033 billion shares valued at N13.369 billion traded in 9,179 deals; thus contributing 71.51% and 70.22% to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 131.153 million shares worth N578.393 million in 811 deals. The third place was Consumer Goods Industry, with a turnover of 92.937 million shares worth N1.750 billion in 2,892 deals.

Trading in the top three equities namely Guaranty Trust Bank Plc, Union Bank Nig. Plc and Wema Bank Plc accounted for 670.354 million shares worth N10.331 billion in 1,990 deals, contributing 46.39% and 54.26% to the total equity turnover volume and value respectively.

All other indices finished lower with the exception of NSE Mainboard, NSE Pension, NSE Insurance, NSE AFR Div Yield, NSE MERI Value and NSE Consumer Goods Index which appreciated by 0.06%, 0.78%, 2.82%, 2.64%, 1.82% and 1.93 while the NSE ASeM Index closed flat.

Forty-two (42) equities appreciated in price during the week, lower than forty-eight (48) equities in the previous week. Twenty-two (22) equities depreciated in price, higher than eighteen (18) equities in the previous week, while ninety-eight (98) equities remained unchanged, higher than ninety-six (96) equities recorded in the previous week.

Commenting on the market reaction to the earnings and dividend declared by quoted companies, the Chief Executive Officer of Global View Capital Limited, Aruna Kebira, stated thus:

Performance of the earnings released is mixed. On a very good day, the market would have reacted to that. Look at Dangote Cement for instance, they paid N16 dividend. There is a saying in the local parlance that a need once satisfied no longer motivates. Since they are paying the same N16, it’s no longer motivating. UBA paid 35 kobo which made investors to be angry with it.”

“Zenith Bank paid N2.70 and the market was not expecting anything less than N2.70 from Guaranty Trust Bank. But they were angry with the delay. Zenith had its released result, they had marked down and even paid; and Guaranty was yet to release as at then. It became a concern that what is the problem? Is it something that anybody don’t know? If you say that, maybe it’s the to and fro activities with CBN; all of them announced that the board as met over their result and sent to CBN. So it took to long for Guaranty to release their result”.

“The rates in the money market are improving. The stop rate for last week auction was 8% from 7% before which means that it has moved another 100 basis points which is very significant to the PFAs. For somebody that can put like N300 billion, that 1% increase is very significant; it can take care of the office runs.

One of the things I saw is that the PFAs and other big time player have already left the market even before the results started coming in. The results that were coming was not sufficient to pull them back because the rate in the money market is still rising.

For a stock which is a risky asset paying a dividend of 55 kobo at a share price of N8 has a yield of 6.9%, and the moment it is marked down, you cannot guaranty how low it will go. Compare this to a risk free rate of 7% in the money market, one would definitely go for 7% that is risk free.

“Going forward my advice is that people should wait to allow divided to lapse completely. There will be a slowdown for most of the stocks as they will come to their support level. Then you can begin to take position from then. Allow stocks to come down to their support level, and then take position to ride with the tide”.

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