After 13 days of trading in 2020, some investors in the stock market have started heaving a sigh of relief following gains recorded so far.
While the market declined by 14.6 percent in 2019, some stocks got over half of their value shaved off.
However, since the beginning of the year, the market has started recovering with the Nigerian Stock Exchange (NSE) All-Share Index (ASI) gaining 10.7 percent as at Monday.
But investors in Dangote Cement Plc and United Bank for Africa Plc are among those already smiling as the two stocks have recorded the highest gains so far. Dangote Cement Plc has gained 23.4 percent, followed by UBA with 22.9 percent, while Ekocorps Plc recorded 22.3 percent.
Zenith Bank Plc has appreciated by 21.6 percent just as NASCON Allied Industries Plc garnered 20.2 percent. UAC of Nigeria Plc chalked up 20.2 percent, while C & I Leasing Plc appreciated 19.5 percent.
Beta Glass Plc ND Okomu Oil Palm Plc gained 18.7 percent each, while Lafarge Africa Plc and Ecobank Transnational Incorporated went up 18.4 percent and 17.5 percent in that order.
Guaranty Trust Bank Plc, Cornerstone Insurance Plc, African Prudential Plc, and FBN Holdings Plc gained 16.4 percent, 16.3 percent, 16 percent 15.3 percent respectively.
Other stocks among the top 20 price gainers so far include; Forte Oil Plc (14.4 percent); United Capital Plc, AIICO Insurance Plc (12.5 percent each); May & Baker Nigeria Plc (12.4 percent). There are five banking stocks among the price gainers, hence the NSE Banking Index has risen by 13.3 percent.
The banking sector is one of the sectors some analysts have expressed high optimism about, noting that it holds good bright prospects.
For instance, analysts at Cordros Capital said despite increased risk in the sector, there remains immense value, in part due to pressured stock prices which were affected by the generally weak sentiments that pervaded the market in 2019.
“Consequently, we reiterate our recommendation that long-term investors should look to take positions in our recommended stocks, with a view to extracting value as the market corrects in future periods,” they said.
The analysts insisted that the narrative has been that the fundamentals of the banking sector remained compelling even as market sentiments have kept prices low.
“However, this may no longer be the case as persistent regulation heightens the overall risk in the sector. After adjusting for increased risk in the cost of equity, the valuations of our coverage companies remain compelling and hold value for both short and long-term investors. Nonetheless, the majority of stocks in our coverage universe have ‘Buy’ recommendations, with FBN Holdings Plc being the outlier with a ‘Hold’ recommendation assigned.
They said the pace of growth of the banking sector has been strong as revenue, profitability, and assets have all expanded in the year, relative to the end of 2018.
“However, the year has also been fraught with challenges as the Central Bank of Nigeria (CBN) has instituted policies aimed at driving credit extension to the private sector, which in our point of view has increased the overall risk in the sector at a precarious time,” they said.
The analysts noted that with the new direction, the trajectory of growth in the revenue of banks will steepen as risk asset portfolios expand, adding that this would come with increased systemic risk, given the pace of growth, and the still fragile state of the economy.
Source: THISDAY
