Stock Market Review: October 16, 2023

Ruth Ibikunle

The stock market last week closed on a bullish note with 1.12% growth. Year to date, the market returned 31.12% with the All Share Index and Market Capitalisation at 67,200.69 points and N36.92 trillion respectively.

In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following were discussed:

•             The stock market last week closed on a positive note with 1.12% growth. What is the outlook for the new week?

Just like it was predicted last week the expectation of the Q32023 will move to lift the market and keep it at that level until the earnings reports of the quoted companies have hit the market and the effect has been fully reflected in the prices of stocks. The market closed in the green territory last week.

The market outlook for this week remains optimistic and it is expected that the market will also close the week in the green zone.

The early birds’ earnings reports would largely chart the direction of the market this week and this month. The spate of the market would depend largely on that as that would tell generally what the Q32023 earnings would be like.

But by and large, judging from what we saw in Q22023, the market is not expecting anything less. Anything contrary to that would move to depress the market.

•             CBN has lifted FOREX ban on 43 items. How would this impact the capital market?

The lifting of the ban on the 43 items would cause a paradigm shift in demand for, supply of, and the prices of these items in the intermediate and long terms.

The effect would not been anywhere this year as the process of importation is cumbersome and takes a long time to realize.

First, importers would have to court the foreign manufacturers and obtain letters of credit from the banks. Shipment will not take anything less than 60 days, depending on which continent is the source.

Remember foreign manufacturers don’t depend on what they supply to overseas economies to break even and make profits. The proceeds from such activities are just additional to their bottom line. For that reason, they would not mind what price they sell, provided they are able to cover their average cost.

Therefore, their participation in our market would lead to dumping and fierce competition for the local manufacturers. One, the raw materials used by the local manufacturers are imported in the first place before they add value and decide the markup price.

But the foreign manufacturers source their raw materials within their environment and in their currencies too.

That dumping and fierce competition would lead to a price war, and the foreign goods prices would be priced low so much that if the local manufacturers have to sell at those prices, it would bring them to their shutdown point, where their average revenue would no longer be able to cover their average cost.

The long-run effect expectation of the government is to lower the cost of goods in the country and the pressure on the Naira, since  such goods are now available locally and in local currency it would in turn help to stem inflation but on the flip side could lead to loss of businessess and unemployment

•             How sustainable is the growth in BUA Cement? Is it a good buy at N105.8?

The entry of the news of cement price reduction by BUA Cement was what the market reacted to, especially when there was no corresponding news of such from other Cement companies.

But the 52-week high price of BUA Cement is N105.80 and that was what it closed in the last trading period.

Discerning market operators are always circumspect of the 52-week low and high price of any stock. They are signals as to whether a stock is being expensive or cheap.

At N105.80, the market, except there is a piece of much stronger news that would help break that resistance price of N105.80,  will tread cautiously in BUA Cement.

The market would need more than the news of price reduction to break the resistance price BUA Cement has set for itself

•What is driving the growth in the share price of ABC Transport? Will the rally still continue?

ABC Transport in their Q22023 declared a loss of N77.376m and an eps of -3.23k

According to their earnings forecast, Q42023, the company forecasted to return N35.866m as PAT.

Since ABC Transport’s declaration of N0.13k, the stock’s performance and the prices have been badly affected.

With a 52-week high price of N1.35 and 52-week low price of N0.23, the only reason I can see for the increase in the price of the stock, bearing all unforeseen information, is the run-of-play of the market

•             The share prices of the newly listed companies, VFD Group and NIDF closed flat, week on week. Why is the market not looking towards their direction?

Apart from the news of VFD Group coming to list in the market from the NASD OTC, almost at the same price, there was other news of their intention for Right issue and private placement.

The price at which the stock was listed was perceived by the market to be rather too high, considering the performances of other stocks within the same range of the listing price.

Because of the price, bids are always in small quantities to the extent that the total bid depth for the days couldn’t sum up to a board lot. So even if there were matched orders at a much higher price than the previous close, the price would still close flat.

•             What are the stocks to watch

Dangote Sugar, NASCON, Transcorp, Fidelity, FCMB, MTN, Dangote Cement and WAPCO.

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