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Bank Stocks Set to Lead Equities Higher in September

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Bank stocks are set to lead the Nigerian equity market higher for the second successive month in August as analysts expect the growth momentum to continue in September.

The NSE ASI Index year to date loss moderated to -5.61 percent as at Tuesday, from -20.81 percent in March, thanks to unattractive yields as well as some positive earnings publications in the second quarter that spurred equity demand, according to analysts at United Capital Limited.

BUA Cement Plc saw net income increase by 13.73 percent to N34.81 billion as at June 2020, even amid tepid construction activities and government budget impasse.

FirstBank Holdings Plc’s net income was up 56.35 percent to N49.63 billion, despite a harsh regulatory environment as excellent risk management strategy led to improvement in asset quality.

Okomu Oil net income was up 29.63 percent to N1.97 billion, thanks to foreign exchange restriction by the central bank on importers of the oil palm.

Despite a weak consumer spending and other myriad of challenges that hinders the growth of consumer goods firms, Dangote Sugar and Flour Mills were able to magnify earnings.

“In September, we expect the equity market to continue the path to recovery after bottoming in March 2020,” said analysts at United Capital Limited.

“This should be supported by the yet to be published H1-2020 earnings from key Banking names due to regulatory approval. A resilient financial performance and the likelihood of maintaining previous year’s interim dividend payment are key factors to watch,” said analysts at United Capital.

Nigeria’s economy contracted the most in at least a decade in the second quarter as the crash in oil prices and the global fallout from Covid-19 hit output.

Gross domestic product shrank 6.1 percent in the three months through June from a year earlier, compared with growth of 1.87 percent in the previous quarter, according to recent data from the National Bureau of Statistics.

Based on the recently released by NSE Domestic & Foreign Portfolio Investment Report for July, total value traded declined 19.9 percent month on month (m/m) to N103.2 billion ($271.6 million) in July 2020.

The decline in value traded was led by offshore investors, down 38.6 percent m/m to N34.6 billion (US$91.1m) while domestic transactions dipped for the third consecutive month, down 5.4 percent m/m to N68.6 billion ($180.5m).

“Going forward, we expect FPIs to retain their apathy towards Nigerian equities; however, inability to get FX may continue to force reinvestments as we have been observing in recent months,” said analysts at CSL Stock Brokers Limited.

“That said, we expect locals will continue to drive the market as we begin to see a flurry of OMO and T-bills maturities in the final months of the year which we expect to boost liquidity,” said the analysts.

The manufacturers are not spared the pang of Covid-19 shock as the Central Bank of Nigeria Purchasing Managers Index (PMI) for August stood at 48.5 index points, indicating contraction in the manufacturing sector for the fourth consecutive months.



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