The equity market in the past few days has been on a southward journey, occasioned by profit taking by investors to participate in the bond market. For 8 straight days until last week Thursday, the market consistently went down back to back. The 7.04% gain in Dangote Cement and 1.61% gain in MTN on Thursday halted the long bearish trend. The market however went down again on Friday went BUA Cement, Dangote Cement and MTN lost 7.22%, 3.51% and 0.49% respectively. Other stocks are already showing recovery as the market breadth on Friday closed positive. But for the losses in the 3 heavy weight stocks, the market would have closed positive on Friday.
Reviewing the market with Mallam Garba Kurfi, Managing Director of APT Securities and Fund Limited, the capital market guru stated thus:
“Actually, when I saw the market declining for 8 days in the month of February, it scared me a bit. Because I remember last year, we started January doing very well. By the time we entered February, it eroded all our gain in January and we closed February in a negative. By the time we entered March with the Covid, the negative escalated to as high as -24%. So when I see the repetition this year, I was a bit scared. However, right from Thursday, the market started rising and I see light at the tunnel. Zenith went as low as N22.80 but before the end of the day, it closed at N24.70, which means it rebounds back. The same thing applys to stock like UBA, Access Bank, First Bank many other stocks. So that gives hope that the market is likely going to bounce back”.
“However, our market is chained to one side, today we have about 4 stocks that controls 60% of the market. Dangote Cement, MTN, BUA Cement and Airtel are the four stocks control about 60% of the Nigerian equity market. What it means is that, at any giving period, if any of these stocks rise or fall, it will negate whatever happened to the market. As we witnessed on Thursday, many stocks closed in the negative, but the All Share Index closed in the positive because Dangote Cement and MTN closed in the positive. So that is why now, the All Share Index does not give a true picture of what happened in the market. Because you have just four giant companies that controls 60% of the whole market. Initially, Dangote Cement single-handedly controls over 35% of the market, by the time MTN listed, it diluted its holdings; then Airtel came in and finally BUA Cement”.
“The problem we get with these four is that they control 60% of the market. So good or bad of the market may not be reflected by the All Share Index but rather the behavioural tendencies of these four stocks”.
Generally, we are expecting that the market may not further go down because most of the stocks were not overpriced. They are trading within the fair value. Some of them have released their Q4 results like First Bank, UACN and many others and that gives us the hope that the market is not likely going to do badly. The market started showing recovery on Friday
So in view of these, as stocks have started showing recovery on Friday, we are expecting they continue their recovery gradually till when they declare their final result. Many of the stocks have promised to hold their Board meeting before the end of February. So either by the end of February or early march, we will start seeing results coming into the market.
Vita foam surprised the market by declaring 70 kobo final dividend which they have not done in the last 10 to 15 years; and the price moved as high as N10. It shows you the market is responding to the dividend pay-out.
We believe, just like Guaranty Trust Bank, Zenith Bank, UCAP and Africa Prudential to mention a few are very good in declaring good dividend.
In the past, you will see that UCAP and Africa Prudential always declare their result in February. If they do so, let us assume that Africa Prudential declares 70 kobo as they did last year. If Vitafom will declare 70 kobo to be trading at N10, nothing stops, Africa Prudential which is currently trading at N6 to go to the same level.
We have seen the Q3 result of UCAP which shows about 40% increase in performance. The market gained 50% in the last quarter of year 2020 of which UCAP is a major player, we are envisaging that by the time UCAP declare their result, they will double what they have done in the last quarter. We anticipate that they will probably anticipate pay more than the 50 kobo dividend they paid the previous year. If they do so, the sky will be their limit. And that will open the window for the rest of the companies that have not yet declared there results. So all hopes are on the table and we are hoping that the market will surprise everybody.
“My advice to investors is that they should not panic because the market lost for 8 consecutive days. For instance, Wapco was trading N21 as at January. By the end of January, it traded as high as N30, in fact it went as high as N31.50. You did not take your profit at N31.50, you did not take profit at N30, you did not take your profit at N28, why should you now take your profit at N23. If anybody decide to sell because of the panic will only regret his action”.