Ruth Ibikunle
The Nigerian stock market started the year 2024 on a bullish note and has not looked back since then. Year to date, the market has returned 7.43% with the All Share Index and Market Capitalisation at 80,328.57 points and N43.957 trillion respectively.
In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following were discussed:
Excerpts:
• The stock market started the year bullish, closing last week with 6.54% growth. It continued on Monday with 0.83% growth. What is the outlook for this week?
Year 2023 was an odd year and to see the market closing the year at that height would have taken some pundits aback. The year 2024 is not only an even year but a leap year. Prophesies have gone into the year from different spiritual organization and religious settings.
Little wonder that the year has started on this bullish note as against how 2023 started.
But the truth of the matter is that what we are experiencing and what we may continue to experience is that history is repeating itself after 20 years.
In 2004, the CBN asked the banks to consolidate on their minimum capital by recapitalizing up to N25bn and that took the market to a whole new level and propelled price increases across all stocks until the bubble burst in 2008-2009.
The CBN amidst the rising of the market muted the idea of a possible recapitalization of the bank and that has set fire to the prices of the banking sector.
That sector is the most liquid sector on board the NGX and it has been that after the climax of the prices of the leading stocks in the sector, there would be a ricocheting effect on the prices of other stocks and that is exactly what we are expecting now.
But the question is, would the market also experience the negative side of the rise, the probability of that happening tends to be zero. Why, there are more strict regulations, the foreign-local participation ratio is skewed in favour of the locals, and the presence of PFAs in the market, real and substantive profit declarations by issuers among other things.
Against this backdrop, we are likely in for another round of stocks breaking their previously set 52-week high prices recklessly.
In the local parlance, it is believed that the market is on steroids. I can see the ASI breaking the 80,000 points within this quarter.
• How sustainable is the current rally in the market
There is still strong news in the market. The recapitalization agenda has not climaxed and is still in the works, the business combination of the Dangote companies, the private placement of Japaul Gold at N2.50, the possible listing of the NNPC on the exchange by this year, and many other private placements being negotiated that are yet non-public information.
If you also look at it, there is increasing liquidity in the market as the market for now is the only liquid investment that guarantees inflation-indexed returns
• What is driving the growth in Unity Bank?
Though the information has not been published on the website of the NGX, it came as rumor that there was a possible talk between Unity Bank and Providus Bank for a business combination. Moreover, as the recapitalization fever began to take effect in the prices of the banking stocks, Unity Bank appeared at that time to be very cheap at a price lower than N2.00 and the market moved to look towards it and the demand has pushed up the price to N2.58.
Whether the stock is tired or maybe tired this week is going to be determined by the events in the coming days of the week.
• How attractive is Transcorp at N13.9?
Transcorp has been a very liquid stock with grand outstanding units of shares. After the play of the billionaires with the price of the stock, it behooves the market that the value of the stock was deliberately hidden by keeping the stock price low.
With an oil well and gencos in its kitty, the stock is reported to have more value than its counterpart Geregu.
And benchmarking the price of its peer Geregu, the market is set to do the needful and make the necessary adjustment, but the snag would be the large outstanding units of share in favour of Transcorp.
But you never can tell the mind of the market. The events of January will either confirm or refute the market’s action in trying to equate the prices of the two power-generating companies.
• Why is Cadbury trending down?
While there is a general gyration of prices in the market, discerning investors still keep their eyes on the fundamentals of a stock. Cadbury according to its Q32023 report made a whopping 464% loss in their profit after tax and the same quantum of loss in their eps.
A loss of N10,242,573 (2023) from a profit of 2,816,666 (2022). With this, the market and nay investors will trade with caution in the shares of the company
• What are the stocks to watch?
NASCON, Dangote Sugar, Japaul Gold, Transcorp, and many others