The NSE All-Share Index and Market Capitalization both depreciated by 1.00% and 0.90% to close last week at 25,016.30 and N13.050 trillion respectively, bringing the market year to date returns to a negative 6.80% while the quarter to date returns stood at positive 17.44%. Share prices of stocks may likely go down further as bargain hunters will book their profit. FUGAZ (First Bank, UBA, Guaranty, Access and Zenith) among others might succumb to sell pressure arising from profit taking.
Mr Aruna Kebira, Chief Dealer of Global View Capital Limited, in a brief chat explained the reasons behind the recent market performance. Excerpts
Can you recall any major event that probably shaped the market direction last week?
There really was no particular event save for the interaction of demand and supply. You could recall that moments after the total restriction on movements was converted to partial restriction, and the market was left liquid by payment of dividends, the market became upbeat driving prices as much as 58% in the case of Zenith from N10.70 to N18.00 and 38% in the case of Guaranty Trust Bank to mention a few.
We cannot expect the market to continue on the rise ad infinitum. Bargain hunters and discerning investors that have this at the back of their minds will need to book profits. The sell pressure over-weighing the buy pressure is the effect we are seeing in the market.
Neimeth, Skyway Aviation, Japaul Oil, UPDC, ABC Transport, Consolidated Hallmark, Dangote Sugar, NACHO, Chams and BOC Gas were top on the gainers list for last week. What does these stock qualities signals in respect to the current market strength?
The market believes that post Covid-19, the pharmaceuticals will be the net beneficiaries of the production of vaccines for the virus. Amongst the listed pharmaceuticals on the NSE are Glaxo, Fidson, Neimeth and May & Baker. The market considered Neimeth at the price of 62k cheaper than any of its peer in this respect and so the market is re-pricing Neimeth to catch up with the rest.
Growth in UPDC is as a result of the unbundling of UACN
Looking at the top losers for last week, what does this say about the current state of the market?
Like I have explained earlier, prices rose to the level we saw them last week and investors who understand the market are booking their profits.
Because this profit taking is in relation to the level of price rallies, it is more prevalent in the high cap stocks like MTN, Dangote Cement, Zenith and Guaranty that determine the market’s direction each trading day.
Secondly a lot of marked downs for dividends payments happened during the week. We know that prices of stocks are reduced by the quantum of the dividend declared and the possibility of most stocks after the mark down to bounce back to the initial prices is remote.
Julius Berger was mark down for both dividends of N2.00 and a bonus of 1 for 5 that saw the price dropped from N27.50 to N21.25
UACN Property Development Company Plc Listed Additional Shares in Rights Issue of 15,961,574,145 Ordinary Shares of 50 Kobo Each at N1.00 Per Share, any comment on this from you?
The market will naturally gravitate towards such a listing. As at the time of listing, the stock was trading at 80k and it was listed at 1.00.
The market will believe that there is a value in the stock as revealed by the listing price that far more outweighs the price at which it is presently trading as such the market is set to re-price it, the price closed at 96 kobo on Friday.
Julius Berger and Total were marked down for dividend last week, any idea of immediate or future price performance
At the mark down of dividends from prices, the dividends and bonuses information has been reflecting fully in those prices. The market will await any other stimuli for the re-pricing of such stocks and if there is none, such stocks may be trading at the axis of the new price for a long time to come.
Such stimuli may be the quarter earnings, capital market activities of such companies or better still a generic stimulus in the general market.
Dangote Sugar, NAHCO, Skyway Aviation, Presco, Trans Nationwide Express, Prestige Assurance and more came to the market with their respective corporate actions last week, can you please comment briefly on these equities
The market will always analyse, dissect and assimilate information emanating from Issuers and react accordingly and appropriately. Dividends yields, earnings growth and quality of earnings are most of the information the market seeks and the presence and absence of such is rewarded accordingly.
What are the specific stocks or sector you can recommend for investment this week
Zenith, GT Bank, UBA, FBNH and Access Bank are on their way down succumbing to sell pressures arising out of profit taking. Targeting a good entry price is what we should have at the back of our minds.
MTN, Nestle and Dangote Cement are not exempted from the list.
Glaxosmith, May & Baker and Fidson have slowed down for the time being, having a good entry point will pay off well at the end of the day.
Share prices of stocks may likely go down further as bargain hunters will book their profit. FUGAZ (First Bank, UBA, Guaranty, Access and Zenith) among others might succumb to selling pressure due to profit taking.