It is over a year now that coronavirus hit the entire world and businesses were shut down. Here we are today, the capital market is still opened. There are so many lessons to learn as regards investing in the financial market in view of covid19 pandemic. Amidst covid disruption last year, the market recorded 50.03% growth. Is there a possibility that the market will achieve same feat this year as the market already returned -3.04% in the first quarter of the year?
Most quoted companies have released their audited reports for 2020 financial year; and to a large extent, performance was good. Despite the obvious challenges created by the pandemic for business operations, most companies were able to weather the storm. Some companies even increased their dividend pay-out in the covid year while some retained what they did the previous year. Going forward, what should we expect from the market in this second quarter? Will the market again achieve 50% growth this year?
In a chat with Mallam Garba Kurfi, Managing Director of APT Securities and Funds Limited, the capital market guru pointed out that the coronavirus triggered tremendous gain for the market in year 2020.
Mallam Kurfi stated thus:
“The coronavirus really created a panic situation in the capital market globally. But at the same time created an opportunity which we never had before. That is why the year ended with a tremendous gain that the market has not gained in the last ten years. We can see that this can be linked to the coronavirus. We have seen stocks that have gained 100%, 200% within a month and this can be linked to coronavirus pandemic. The lesson learnt is that in this market, anything is possible. Thereafter, we have seen stocks that can gain tremendously even within the short period.
The market achieving another 50% growth this year is not likely to happen for obvious reasons. The coronavirus met the market in a loss of two consecutive years. The combination of the loss was over 35%. Now that the market has regained 50%. History may not repeat itself for the market as a whole. However individual stocks might achieve such level of growth, but not the market as a whole.
Performance of the market is a function of the performance of quoted companies as well as the money market situation. If you look at the money market, it is recovering very fast. Treasury Bills that was trading at 1% recently traded above 4%. That is 300% growth in just a couple of weeks. If this continues, there will be shift from the equity market into the money market. Going forward, individual stocks will regain their position, but not the market as a whole.
There is hope in the capital market and you can play the capital market. The era of waiting for 50%- 100% gain is gone. If you get 15% to 20%, take your profit. If you do that you can repeat it. I have seen a number of stocks that gained 10% to 20% within a month; they can repeat it 2 to 3 times within a quarter. If you can play those stocks, you will make it. Japaul is one of them. Guinness went has high as N35 from N14; it came down to N24 and it is currently trading at N31.85”.