Stocks kick off Q4 higher as focus shifts to earnings season

Nigeria’s equities market is seen regaining most of its recent losses after kicking off the fourth-quarter (Q4) on a positive footing by 0.59percent.

The positive record seen on Tuesday, the first trading day in the last quarter of 2023 came after a decline by 0.25 percent in September.

Ahead of market close, analysts expected investors to shift focus to companies third-quarter (Q3) earnings as the season fast approaches.

“We expect to see investors taking positions in anticipation of the third-quarter (Q3) 2023 earnings season. Investors will continue cherry-picking activities around fundamentally sound stocks with a preference to companies that have posted strong results in the first half of the year,” said research analysts United Capital.

United Capital analysts advised investors to buy shares of Access Corporation, FBN Holdings, FCMB Group, Fidelity Bank, GTCO and Zenith Bank. Also, this week, they have bullish bias for stocks like Dangote Sugar, Unilever, Flour Mills, Nigerian Breweries and Guinness.

Investors are bargain-hunting stocks that present attractive capital appreciation opportunities. The market which ended September with All-Share Index (ASI) and equities capitalisation at 66,382.14 points and N36.331trillion rose to 66,770.97 point and N36.544trillion. Stocks like BUA Cement, Beta Glass, UACN, FTN Cocoa and Oando were on demand on Tuesday.

“We anticipate a corresponding previous week sentiment trading in the absence of positive catalysts. We advise investors to invest in high-quality stocks with strong fundamentals supporting them,” said investment research analysts at Lagos-based Futureview.

The Debt Management Office (DMO) on behalf of the Federal Government on Monday announced the October edition of the FGN Savings Bond.

Read also: Investors trade N2.42trn worth of stocks in eight months

DMO is offering for subscription the FGN Savings Bond due October 11, 2025 and October 11, 2026. The savings bond offer which opened on Tuesday October 3 closed on Friday October 6, 2023.

The two and three-year tenor savings bonds are offered at an annual coupon of 11.074percent and 12.074percent respectively.

The stock market had resisted the confidence in a better economy recently expressed by Olayemi Cardoso, new governor of Central Bank of Nigeria (CBN).

The Nigeria’s apex bank chief expressed optimism over the economy and measure to stabilise volatile FX market which has put investors in a cautious mood.

After the Independence Day holiday, the FX market opened on Tuesday October 3 with the dollar trading at N1,005 at the parallel segment of the market as against N1,008/$ it exchanged last Friday.

Market watchers still anticipate communication from the Central Bank of Nigeria (CBN) with regards to the September monetary policy committee (MPC) meeting that was postponed.

“With bearish sessions dominating last month, the market lost 0.25percent, compared to the 3.44percent return in August. With no positive driver in the market, we anticipate similar mixed trading sessions this week, as investors begin to look forward to Q3 earnings report,” according to Vetiva research analysts in their October 3 note to investors.

Vetiva wants investors to buy shares of GTCO, Zenith Bank, Access Corporation, FBN Holdings, FCMB Group, Fidelity Bank, Lafarge Africa, Julius Berger and MTNN.

The analysts believe that these stocks are highly undervalued, but with strong fundamentals, and have the potential return in excess of or equal to 15percent realisable between the current price and analysts’ target prices.

“For three consecutive weeks, the performance in the market has been relatively bearish. Also, activity levels have been lower despite half year (H1) 2023 earnings releases.

“Thus, we expect the negative sentiment in the market to linger this week owing to our opinion that there are limited positive triggers that could spur buying activities from investors,” said analysts at Meristem research.

Meristem analysts said their top stock picks for the week are GTCO with expected return of +33percent, Fidson (+51percent), AIICO (+15percent), and Lafarge Africa (+15percent).

According to them, “technical indicators, including the Relative Share Index (RSI) point and Price Action, signify continuance in the negative trend.

“Notwithstanding, we do not rule out bargain hunting activities on tickers that present attractive capital appreciation opportunities. Putting all these factors into consideration, we anticipate that the NGXASI will record week-on-week loss,” Meristem analysts said.