Ruth Ibikunle
The stock market on Thursday closed on a bearish note, shedding 1.04%. Year to date, the market has returned 7.15% with the All Share Index and Market Capitalisation at 54,915.61 points and N29.916 trillion.
The MD/CEO of Global View Capital Limited, Aruna Kebira in a stock market review gave in-depth insight on the current market mood.
Excerpts:
For four straight days this week, the market has been down. It dropped by 1.04% on Thursday. Why is the market in the red, even with the earnings season?
The stock especially the one we have in Nigeria is information driven. For every non-public and public information entering the market arena, the market moves to reflect and discount stock prices respectively.
This is earnings season that is fraught with mixed information.
Firstly, it coincided with the elections period and we have seen the outcome of the first one.
Secondly, the season of no cash comes in and almost paralyzed every aspect of our normal economic activities.
The numbers emanating from the National Bureau of Statistics is nothing to cheer about as inflation continues to climb and just recently, it was announced that the Silicon Valley Bank has failed.
We know since the crash of the global market in 2008, news of that type will definitely have a negative impact on the prices of stocks in the domestic bourse.
The cashless situation almost rendered the banks’ operations to a standstill. There is also the fear of the quality of the expected Q1 2023 results.
These and more are what is planting the bears in the market.
MTN and Ecobank are trending down. What could be the reason?
The recent fall in MTN and ETI is out of the current market momentum. The market is generally trending down as a result of all the aforementioned conditions.
But the point of reflection for both might just be in the next trading session. Especially MTN, the stock has strong fundamentals and is also resilient.
What are the possibilities in Access, FBNH, and Zenith Bank?
Though the point of a rebound may differ between the three stocks, Zenith has the highest possibility of a turnaround and also the highest dividend yield among the three.
The lower the prices, the higher the dividend yield.
Nigeria’s inflation rate in the month of February grew to 21.91% according to NBS. What impact will this have on the capital market?
The rising inflation is a true reflection of the current state of the economy. It continues to tell us that we are far from where we want to be.
We have seen the CBN raining the MPR to tame inflation, it just portends that as the inflation keeps growing, there would be a tendency for the CBN to tinker with the MPR upwards.
The higher the interest, the higher the cost of funds and doing business that would have a multiplier effect on capacity utilization and profit making.
The quantum of profit made is what gives rise to the quantum of dividend declarable and if these are in reverse, it will adversely affect the capital market.
Inflation as a stand-alone will tend to reduce the purchasing power of investors. In simple economics, income is either consumed or saved but when the quantum of consumption grows, it decreases the quantum of savings and all investments are made from saving.
By that extension, the aggregate investment will tend to decline which will lead to illiquidity in the market.
Now that CBN has ordered the use of old Naira notes, is this likely to boost capital market participation?
The extent of the disruption of activities of the scarcity of naira notes can only be imagined. A lot of people have been demobilized and incapacitated in one way or the other.
Though, the legal standing in the capital market is that there should not be any business transaction in cash in excess of N50,000.
The reintroduction of the old notes in circulation will go a long way to ameliorate the standstill the economy has been thrown into and commercial activities will return to normal and will also dovetail into the market.
What are the stocks to watch?
Stocks have been battered for a fortnight now, the lower you can get these to buy the better. Stocks to watch include:
Nigerian Breweries, Zenith, GTCO, Flourmills, MTN and WAPCO.