Wole Olajide
The world at large is not only faced with the challenge of COVID-19 pandemic but also with the crash in the price of crude oil. The Nigerian economy which is mostly dependent on crude oil is seriously affected by the global oil crash. Added to the economic challenge is the pandemic COVID-19.
The combined effect of these two global challenge obviously affected the Nigerian capital market as foreign investors who are the big players in the market exited. At that, panic sales of equities by foreign and local investors brought the
share prices of equities to the lowest low.
In a chat with Mallam Garba Kurfi, the Managing Director of APT Securities Limited and Mr Aruna Kebira, Chief Dealer of Global View Capital Limited, the two investment gurus advised that this is the best time to invest in fundamentally sound stocks.
According to Mallam Kurfi, MD of APT Securities Limited, the COVID-19 pandemic brought volatility to the market.
“When there is volatility, the market is better off, it just about entry at the right time and exit at the right time.
“Look at Lafarge (WAPCO), as at Friday, I was buying at Lafarge at N8.90; Lafarge closed at N10.75. Assuming you entered at N8.90 and decide to get out at N10.75, you have made 20% profit. If you choose to hold it further, till tomorrow or next, you may get up to 30%.”
“Volatility is what excites the market, not stagnating in one place.”
“Zenith Bank went as low as N10.85, Zenith closed today at N12.95.”
The current situation brings volatility. What we are seeing is currently in the market is caused by fear; not that the companies are doing badly. How can a stock give you N2.85 dividend and then trade it at N10? It doesn’t make sense. UBA paid N1 as dividend and now it is trading at N5.45. With all these opportunities, why can’t you invest now?
Nestle which traded a year ago around N1300 and N1400 is trading at N765. If you buy now, you will get N45 final dividend”
Look at Dangote Cement, it closed at N117 on Monday. If you buy at N117, it will give you N16 dividend. That is 14% dividend yield.
“For those who are serious this is the right time to take position”.
Malam Kurfi though expressed concerns that majority currently playing the market are local players. According to him “if foreign investors come in, they will bring liquidity and big ticket transactions”
“But as long as the price of crude oil is low, there is likely we see less participation of foreign investors. It is a challenge because foreign investors play 48 to 50 percent of the market”
What is the market expectation after COVID-19 pandemic?
According to Mr Aruna Kebira, Chief Dealer, Global View Capital Limited, the positive results and news from health officials in the fight against COVID-19 in Nigeria brings a lot of hope to the Nigerian economy as a whole.
“With the number of recoveries so far and the fact that growth in the number of cases is only arithmetic, not geometric or exponential, this means in a little while every thing will be over and there will not be any reason to extend the lockdown after 14 days.
“A number of of stockbroking houses that did not activate their their OMS are not trading, they are out of the market. This has reduced the number of participants in the market.
First Bank declared 38 kobo dividend on Monday, a number of investors will want to buy FBNH, but since the particular house where thier account is domicile cannot trade. Those people will ne eager to come back to the market.
The price of oil as at Monday rose to $34. There is every possibility that between now and the end of the lockdown that price of oil might hit $40.
I believe the market will look up upward if the lockdown is not elongated. That will inform people that the COVID-19 case has been curtailed. Should lockdown be extended for another week, it means there is still fear outside.
Mr Kebira advised investors to take position in fundamentally strong stocks. For instance FBNH paid 38kobo dividend and the share price has moved to N4.40 from N4.00
Most dividends are hanging because of the lockdown as companies could not hold AGM. That one too is going to affect the market.
“First quarter report is around the corner. Assuming we are not in lockdown, at the end of we should be seeing the results of first quarter”