Fbnquest says 2020 looks set to be another weak year for equities

For Fbnquest equity research analysts, the year 2020 is looking set to be another weak one for Nigeria equities.

They however noted that the market has clawed back a bit of its losses since in April, adding that “stocks are still looking very cheap based on our fair value estimates”.

These were the views of Uwadiae Osadiaye and Tunde Abidoye, equity research analysts at FBNQuest in their presentation during the Fbnquest media engagement session held recently. The equity research analysts noted that the All Share Index (ASI) is down -4.6percent year-to-date (YTD) “after two straight years of losses.”

“Looking at historical performance since 2017, the Nigerian Stock Exchange (NSE) underperformance is even worse at -3.8percent return versus circa +51percent, +108percent and +12percent for the S&P 500, Nasdaq and Johannesburg Exchanges. Kenya also returned +5percent.

“The key drivers include issues around FX liquidity, lower oil prices, reversal of capital flows following the Covid-19 pandemic, and weak GDP growth (-6.1percent in second quarter). Performance not also helped by stimulus driven rally in the US market. Nigeria now faces the two twin deficits – fiscal and current account”,

Fbnquest equity research analysts added.

On their valuation for banking stocks, they said, “Excluding Stanbic IBTC and Gtbank, almost all the banks are trading below book values. However, our preferred picks within the sector are Zenith and GTBank.”

Speaking on the Telecoms stocks, the analysts said their N206.1 price target (PT) for MTNN “implies a potential upside of 74percent from current levels”; while on Oil & Gas, the analysts believe that upstream companies are likely to record losses for the year “as sector is unlikely to make a strong comeback from a very weak half-year (H1)”.