Ruth Ibikunle
The Nigerian stock market continued its upward journey on Wednesday with 0.12% growth. Year to date, the market has returned 13.37%.
In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the capital market guru explained the reasons behind the current bull in the market.
Excerpts:
The stock market on Wednesday closed on a positive note with 0.12% growth. How sustainable is the current bullish trend?
I would say the current bullish run is sustainable until the New Year as the prices of stocks today are a reflection of tomorrow’s expectation.
The various policies emanating from the Apex bank is something to cheer about as when these news enters into the market space, investors analyse and react accordingly.
The current contractionary policy stance of the CBN is to mop up excess cash hitherto available outside the Banking system.
This would lead to less demand for the dollar and less pressure on the naira, and consequently will help stem inflation.
If that is true, the CBN can begin to reverse rates that will give rise to the development of the real sector of the economy.
As the market is assimilating all these, there would be renewed buying interest that would subsists the current rally.
Don’t also forget the Santa Claus rally that rise to meet with the current trend in the market and the perceived actions of the Portfolio Managers to close their books well for the year.
•What is driving the price of Japaul Gold, Honeywell and May & Baker?
Based on the aforementioned reasons for the market advancement, the same frenzy is seeking for cheap and neglected stocks. Discerning investors are taking opportunities and are rejigging and re-aligning their portfolios in line with the current information.
Honeywell Flour declined to N2.11 and as the market is talking shape, its price is being returned to the price it dropped from.
May and Baker prices were driven by the market forces and the market’s run of play.
•How attractive are Nigerian Breweries, Geregu and Nestle?
NB was marked down on December 7, 2022. My expectation was that the non-discerning investors would scrabble to exit the stock as they have been qualified for the benefits thereby driving the price to a low of N33.15k. At that the stocks would have been too attractive to buy.
But every of the investors became discerning given the fact that it is NB we are talking about.
If it had dropped to a low of N33.15, I would have thought that its 52 weeks low of N28 was feasible but the reverse was the case.
But even at the close of price of N38.50, NB is still good to go.
Nestle price declined to a new low of N963.90 as a result of big divestment which was not premised on the managerial efficiency of the company.The price would have reversed since but 100,000 units of Nestle on both legs is now a common place. Even at the price of N980.00, Nestle is a good buy.
Geregu was listed at N100 and the price is currently at N107. Ordinary and price wise, the stock is trading very close to its 52 weeks low and that would have been very attractive but the last earnings release of the company is not actually clear to me.
But at the current price of N107, we should keep an eye on the stock.
•Why is Flour Mills trending down? Is it a good BUY at N27.6?
Flourmills and its associates, Honeyflour and NNFM have been badly hit by the cost of the main raw material to their operations which is wheat.
That had formed about 90% of their running cost and each of the time throws their earnings into a loss.
That situation has not changed as the rift between Ukraine and Russia , which was in any the cause in the very first instance has not be put to rest.
As much as that persists, investor would also have that at the back of their minds when price the stock. The situation will only reverse when the market observe a reversal of this in their next quarterly earnings releases.
•What are the stocks to watch?
Nigerian Breweries, Guinness, Okomu Oil, Fidelity, Presco and Fidson are still good to go at their current prices.