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Saturday, March 25, 2023

Summer Holidays Trigger Selloff as Oil Stocks Remain Resilient

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While the oil and gas index maintained a growth momentum since the start of the year, other indexes have capitulated to a sell-off by investors who need cash to fund their summer holiday trips.

The NGX Banking index has recorded a negative year to date return of -6.69 percent, underperforming the NGXASI index gains of 16.43 percent.

Interestingly, Zenith Bank has lost -16.45 percent so far this year, likewise United Bank for Africa, -10.56 percent; Guaranty Trust Holdings Co, -23.08 percent; FBN Holdings, -3.95 percent, and Access Bank, -4.30 percent.

The Industrial Goods Index that comprises Dangote Cement, Lafarge Africa, and BUA Cement has lost -1.60 so far this year.

It is not surprising that the NGX-Insurance has been in a negative territory since the start of 2022 as investors’ apathy towards sector players’ shares heightens on the back of abysmally poor dividend and a delay in the recapitalization of the sector by the regulator. The index has a negative year to date (YTD) of 15.68 percent.

The NGX-Consumer goods index has a negative YTD return of -2.84 percent as investors’ snubbed record profit grow recorded by sector players in the second quarter.

There are also concerns about the impact of inflationary pressures that is eroding consumer purchasing power, higher diesel prices, foreign exchange scarcity, and rising prices of grains on future margins.

A deteriorating currency will balloon the cost of production of companies who import raw materials to meet production.

Analysts say the command and rule soviet style of the central bank governor who has imposed capital controls in order to stabilize the economy is significantly responsible for capital flight and deteriorating foreign portfolio investment.

There are also uncertainties surrounding the 2023 elections and it is evident that market participants pull their monies out of equity and pour them into safe haven assets.

Analysts say the rally that we were seeing was propelled by local investors who are allured by divided paying-stocks and impressive earnings results.

At the close of trading today the top gainers were: Caverton gained 10 percent at a price of N1.10; Champion Breweries up 10 percent to close at N0.44; Unity Bank, +9.3 percent as at price of N0.47; Livestock Feeds, 8.70%; Japaulgold, 8.70%, and Julius Berger, 5.65 %.

The top losers were: BUA Cement, -9.96; Neimeth, -9.68%; International Breweries, -6.54%, May and Baker, 6.42%; UACN, 6.25%; Linkage Assurance, -5.56%, and Sovereign Trust, -3.85%.

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