Half year results to set tone for performance of stocks, say market operators

THE PER FORMANCES OF LISTED companies on the Nigerian Stock Exchange (NSE) in the first six months of the year will come to the full glare of the investing communities when the companies begin to release their half year financials, in regulatory compliance.

The results, which will capture operational details of the companies in the months of April, May and June, will also depict how much the economic disruption engendered by Coronavirus pandemic has impacted on their operations.

According to market dealers who spoke with Business A.M., this expectation is currently guiding activities of investors in making their decision to key in or pull out of the market and sell off shares.

Garba Kurfi, managing director and chief executive officer of APT Securities Limited, explained that the current trend is that the market has experienced its bad situation in March, when it went as low as losing 24 per cent in the AllShare Index.

The loss for that month, according to records, was more than what was lost in 2018 and 2019.

“But since that time, the market started recovering. So, in April, market gained over 8 per cent and in the May, it recovered about 10 per cent before falling again. That is why our total loss now stands at about 6-7 per cent.

“Even though we cannot write off the impact of COVID-19, because the impact of the pandemic will be more visible by the time companies start releasing their half year reports, because every May, June impacts will appear in the half year result, and therefore we are expecting the companies to declare half years result and definitely once they do that, the prices will go further down.

“This is the situation we are waiting for. But if the market goes further down, it is likely to come up quickly because the situation will create opportunities for bargain hunters to take short term positions. That is exactly what we saw in April.

“So, this is where we are and now, there is anticipated recession and the market will reflect this, but not sharply. I believe the local equity is already down and I doubt if it will sharply further go down, despite the pandemic effect.

“Once you are down to this level, the only way is to go up and that is what we are anticipating, that the market may not suffer much loss as the industries are,” Kurfi, he said.

He recalled that in April, Nestle Plc was trading at the rate of N750 but as at Friday, it was trading N1,200. “So, from N750 to N1,200, it gained almost N540. If you bought then, you would have made about 50 per cent profit.

“It was the same thing with the Nigerian Breweries that went as low as N22 in April, but by first week of June, it was trading at N45. That is a gain of 100 per cent. So, when you check other stocks like Zenith Bank, GUARANTEE and others, they have the same story.

Kurfi noted that most of the corporate actions have come and gone, but investors are waiting for half year performance update as the reports will contain performance in April, May and June, a period that marked the peak of the Coronavirus disruption.

On his part, Lawal Azeez, head of capital market research at Capital Bancorp Limited, said most foreign investors that pulled out of the equities market but were unable to repatriate, due to forex scarcity, will likely return to the market after seeing the half year reports and measure the impact of Coronavirus.