Stocks rally ahead of Q3 earnings season

Nigeria’s equities market is seen regaining most of its recent losses after kicking off the fourth quarter on a positive footing ahead of the earnings season for Q3.

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’ Q3 earnings.

“We expect to see investors taking positions in anticipation of the third-quarter 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 at United Capital.

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

The market, which ended September with All-Share Index and equities capitalisation at 66,382.14 points and N36.331 trillion, rose to 66,770.97 points and N36.544 trillion on Tuesday. Stocks like BUA Cement, Beta Glass, UACN, FTN Cocoa and Oando were on demand.

Read also:Stocks gain N213bn as week opens

“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.

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, will close on Friday.

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

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

The apex bank chief had expressed optimism over the economy and measures to stabilise the volatile foreign exchange market which has put investors in a cautious mood.

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

Market watchers still anticipate communication from the CBN with regards to the September Monetary Policy Committee meeting that was postponed.

“With bearish sessions dominating last month, the market lost 0.25 percent, compared to the 3.44 percent 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,” Vetiva research analysts said in a note to investors on Tuesday.

Read also:Stocks kick off Q4 higher as focus shifts to earnings season

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

According to the analysts, these stocks are highly undervalued, but with strong fundamentals, and have the potential return in excess of or equal to 15 percent 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 2023 earnings releases,” said analysts at Meristem Research. “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.”

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

They said: “Technical indicators, including the Relative Share Index 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.”