Ruth Ibikunle
The Nigerian stock market last week closed on a bearish note as the All Share Index declined by 0.93% week on week. Year to date, the market has returned 26.28% with the All Share Index and Market Capitalisation at 64,721.09 points and N35.442 trillion.
In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following were discussed:
The market last week closed on a bearish note, shedding 0.93% week on week. What is the outlook for the new week?
The mixed feelings in the marketplace concerning the inflation figure, the list of ministerial appointees and their portfolios, and the looming possibility of the CBN tinkering with the MPR with a view to raising it culminated in the bearish closing of the market last week.
If you ask me, there is no end to the speculation of the above and until they have fully been reflected in the prices in the market, the chance is, we may have another bearish outing this week.
Except there is another positive stimulus or stimuli, whether exogenous or endogenous that would change the current market direction. If not, we would experience another bear session in the week.
Insurance companies dominated top gainers last week. What are the possibilities for stocks in the insurance sector?
The business model of the insurance sector has not placed them to unnecessarily obtain facilities from the banks or hold liabilities dominated in foreign currencies.
So, the unification of the forex and the subsequent revaluation of assets and liabilities of most companies did not have much impact on their operations.
Before now, the insurance sector regulator has mandated them to always mark their positions to the market and adjust for losses way back before now and their books had taken the hit. I believe they have been running with it and that makes them to be free from the impact of the forex unification policy.
Be that as it may, some insurance companies have good outings in the Q22023 earnings reports and the market took cognizance of that and that is why the market is rewarding them at this bearish period of the market.
What are the possibilities in Okomu?
Okomu Oil’s 52-week high is N265.00. The Q22023 eps fell from N17.65 in 2022 to N16.98 in 2023. The market hates declining results. The market has entered into a bearish session, the only possibility in Okomuoil is to reverse up to its 52-week high price from the current price of N250.00 and that would be about a 6 % spread. For a high cap like Okomuoil, would that be worth the while of a speculator?
But for the investors and the long-termers, there is still a possibly of the stock surpassing the 52-week high in due course
According to NBS, the inflation figure has risen to 24.08%. How will this impact capital market participation?
Remember that in the wake of the release of the June inflation figures by the NBS, it stated that the effect of the removal of the PMS subsidy was not captured and reflected.
It should not be a surprise to us if the figure so released is this much.
But with this, it is a pointer that at the next MPC meeting, the members would vote to raise the rate even if it is another 250 basis points.
As the CBN is trying to control the volume of money in circulation by its contractionary monetary policy, food inflation keeps pushing up the figures thereby triggering another reason for the tinkering of the CBN with the rate.
Even if we know that the inflation in the country is rather of cost-push and not demand-pull, the CBN would want to be seen making efforts trying to tame the numbers.
The impact of a continuous rise in inflation figure is that it weakens the purchasing power of the investors. When the price of other commodities rises, there would be a substitution effect given the scale of preference of the investors.
If consuming to stay alive is the possible option, then savings would either be reduced or eliminated totally.
If that is true, aggregate investment is reduced and investment in equities is not divorced from that investment that is reduced.
Consequently, funds would be taken from the market to fund consumptions which will drive liquidity out of the market.
Subsequently, the bears would be invited into the market and they would take dominance until there is another stimulus that would change the trajectory.
MTN has announced its intention to raise fresh capital via Commercial Paper Issuance Programme. Will this make the share price of MTN to appreciate?
Commercial is more or less a private fundraising outside the capital market. They are not issuing fresh units of the shares of the company for subscription, so dilution of outstanding shares is ruled out.
It would only reflect in their income statement as interest paid and probably in their financial statement as a financial liability.
But as much as they utilize the funds to generate returns higher than the cost of funds, there would be no issues and that would not actually have any market impact on the stock per se. This is not their first time of embarking on such exercise and may not be the last time.
How attractive is FBNH at N18.80?
FBNH’s 52-week high price is N23.50 and N9.00 as its 52-week low. Considering the battle for the soul of the bank and the recent information surrounding the bank as its AGM and the subsequent holding of the same and payment of the declared bonus, the stock at N18.00 is good to go.
What are the stocks to watch?
Nascon, Dangote Sugar, Transcorp, Japaul Gold, NB, Guinness and FBNH