Stock market outlook as CBN retains key lending rates

  • Stocks to watch

The Monetary Policy Committee of the Central Bank of Nigeria has retained the Monetary Policy Rate at 11.5%. It also retained the Cash Reserve Ratio and Liquidity Ratio at 27.5 per cent and 30 per cent respectively. Interestingly, the inflation report by the National Bureau of Statistics also came in the course of last week which revealed that Nigeria’s inflation rate dropped to 17.01%. These are positive signals for the economy which should obviously impact the capital market positively.  

The market will round up the third quarter by the end of September and in matter of weeks, Q3 results will be out. With the fantastic Q2 outings, one should anticipate better performance of quoted firms in their Q3 earnings.

Commenting on the recent outcome of the Monetary Policy Meeting and market performance, the MD/CEO of Global View Capital Limited, Aruna Kebira stated thus:

“The MPC has retained all the indices and the inflation moderated, but the liquidity in the market is not encouraging. There was an auction about a week ago and the rates in the money market keep looking up. As far back as last week, I saw the 2036 FG bond doing 12.35%; and sharply it rose to 12.79%. These 200 basis points increase actually means so much as far as the capital market is concerned; where we are talking about hundreds of millions of Naira, so 1 basis point is huge. I think that is where people are going to.

The rates are increasing in the money market and most of the liquidity is there. Yes you might say that there is increase in volume and deals. It could still be the money that has been in the system. People would have sold and still remained in the system to take advantage of the low prices.

The market has been coming down and stock prices have been coming down. Okomu fell from N110 to N104 on Friday. Zenith has touched below N24, which is not supposed to be. Access was marked down for interim dividend on Friday and closed at N9. The liquidity in the system as far as the market is concerned is not encouraging.

Every other thing is moderating, but there is still issue with FX. With the pronouncement of the CBN that they want to go after the defaulting Bureau De Change that did not adhere to the directive of the new CBN policy on Foreign Exchange. This means there is still challenges in the FX market. I understand that in the black market now, a dollar is N550. In all, I still see light at the end of the tunnel. More so that this month is the last month of the third quarter of the year. By the time the month ends, we are waiting for Q3 results. We saw that Q2 results were fantastic, the market may likely begin to adjust based on the prices that we have seen now in preparation to end the year”.

Stocks to Watch

According to theMD/CEO of Global View Capital Limited, Aruna Kebira, the prices of stocks are now better for entry because the market has actually beaten them down. The following stocks are recommended by the market guru:

  • Fidelity Bank came out with a fantastic Q2 result. The price got to N2.45, it is trading at now at N2.43. Good enough if you can get it less than that.
  • Okomu Oil was trading at N110 before. Now it is trading at N104, which means you can even get it lower than N100 during trading day especially when you are getting bulky units. It is still a very good buy.
  • BUA Cement has been on offer at N61.20 which is the 10% limit down. By the time information hit BUA Cement, you will not see it at N61.20.
  • Zenith Bank is trading below N24 on Friday; it is still a good buy.
  • GTCO is coming down, though it closed at N28 on Friday. It has been trading around N27 and probably under N27.
  • Access Bank was marked down for dividend and it closed at N9 on Friday. With a fantastic Q2 result, when the market becomes good, you will not see Access Bank at that price again.
  • Courtville Business Solution’s Q1 and Q2 results were encouraging. If is true that they have gotten other State Government’s patronage, their Q3 will be better than previous performance.
  • BOC Gases has changed over management as it has been acquired by TY Danjuma. With the position of TY Danjuma in the Company, what he was able to achieve in May and Baker, he will also be able to bring to BOC Gases.

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