Demand for Dangote, Nestle and stocks listed in the agriculture and banking sectors have led to a sharp rise in share prices, taking the All Share Index (ASI) to a new two year high. This is even as oil prices rallied in the international markets, following OPEC’s decision to cap Nigeria’s crude oil production once it hits 1.8 million and also monitor a stricter compliance to its production cut agreements.
Rising crude oil prices are known to have a positive impact on the performance of the Nigerian stock market, due to the country’s dependence on crude oil revenues.
The All Share Index rose 2.54 percent to touch a new high of 35,065.47 level to post its second consecutive day of gains. The banking index was up 2.62 percent. The market capitalisation also hit a new high of N12.09 trillion in a trading day that saw 288.58 million shares worth N2.46 billion exchange hands.
Traders however explained that investors were buying on an optimistic outlook for half-year company results.
The stock market report of trading activities yesterday, showed that Dangote Cement topped the gainers chart, moving up N10.90 to close at N233.50. Other stocks that made the top gainers chart yesterday, included; Nestle (N8.00), FO (N5.40), Okomu Oil (N3.20), Presco (N3.05), Stanbic (N1.67), Flourmills (N1.33), UBA (0.96), WAPCO (0.80) and Zenith Bank (0.75).
Investors are mainly taking position in anticipation of interim dividend payments, especially from the banks, in respect of half-year earnings performance. Many of the tier I banks, including Zenith, GTBank, Access, UBA, have a tradition of paying interim dividends at half year and investors are taking position to advantage of the payments, traders have told BusinessDay.
Analysts who track stocks have already placed many of these stocks on a “buy” or “hold” recommendation, due to the expectation that they will pay interim dividend and also on expectation of improved half year earning announcement.
Some of the stocks that are re-occuring in the ‘Buy’, ‘Hold’ recommendations of top analysts tracked by BusinessDay, are those of Guaranty Trust Bank Plc, Zenith Bank Plc, Access Bank Plc, FBN Holdings, and United Bank for Africa Plc. Others are: FCMB Group Plc, Diamond Bank Plc, and Fidelity Bank Plc.
These stocks and other non-bank stocks made the basket of top-picks by analysts at United Capital Plc, Vetiva Capital Management Limited, Afrinvest Securities Limited, SCM Capital Limited, and GTI Securities.
But in addition to the banking stocks, analysts are putting a buy and hold case for Flour Mills of Nigeria Plc, UAC of Nigeria Plc, Nestle Nigeria Plc, Dangote Cement Plc, Nigerian Breweries Plc, Guinness Nigeria Plc, Lafarge Africa Plc, PZ Cussons, Mobil Oil Nigeria Plc, Total Nigeria Plc, Okomu Oil Palm Plc, and Presco Plc
GTI also makes a case for Forte Oil Plc and Julius Berger Nigeria Plc, while UBA, Nestle, Nigerian Breweries, GTBank, Fidson, Dangote Sugar and Stanbic, are on their watch list.
Afrinvest Securities top picks are Fidelity Bank Plc, ConOil Plc, Mansard Insurance Plc, Unilever Nigeria Plc, and Lafarge Africa Plc.
Meanwhile Oil rose around 3 percent on Tuesday, a day after U.S. oil producer Anadarko, said it would cut capital spending plans and Saudi Arabia vowed to reduce crude exports to help curb global oversupply, according to a report by Reuters.
Brent crude futures rose $1.37 or 2.8 percent to $49.97 a barrel by 12:06 p.m. (1606 GMT). U.S. West Texas Intermediate futures rose $1.39 or 3 percent to $47.73 a barrel.
Lower oil prices in June and July may be affecting U.S. shale production, said Mark Watkins, regional investment manager at U.S. Bank.
“Companies are not drilling as fast they had been in the beginning of 2017,” he said, “They’re not producing as much because it is much less profitable with prices in the low $40s.”
On Monday, Anadarko Petroleum Corp posted a larger-than-expected quarterly loss and said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so.
Earlier, Halliburton’s executive chairman said growth in North America’s rig count was “showing signs of plateauing.
“In the U.S. investors have been waiting to see where that top is in oil production,” Watkins said, “We’ve hit a tension point.”
At a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers on Monday in St Petersburg, Russia, Saudi Arabian Energy Minister, Khalid al-Falih, said his country would limit crude exports to 6.6 million bpd in August, down almost 1 million bpd from a year earlier.
Nigeria agreed to join the deal by capping or cutting its output from 1.8 million bpd once it stabilizes at that level.
OPEC said stocks held by industrial nations had fallen by 90 million barrels in the first six months of the year, but were still 250 million barrels above the five-year average, which is the target level for OPEC and non-OPEC members.
Market players will watch U.S. crude inventory data due Tuesday afternoon, from the American Petroleum Institute and Wednesday morning, from the U.S. Energy Information Administration. Analysts estimated, on average, that crude stocks fell 3 million barrels in the latest week.
“The general consensus around the campfire is that you’re going to get sizeable draws in crude and gasoline,” said Robert Yawger, director of energy futures at Mizuho Americas.
A weaker dollar is also supporting crude prices, Yawger said.
China’s crude imports will exceed 8 million bpd this year and should grow by a double-digit percentage next year, a Sinopec Group executive said.
