Despite the bullish sentiment in the equities market that has seen the market rising over 30 percent so far this year, equity dealers and investment analysts have said that there still exist more room for further uptick in stock prices.
They argued that most of the stocks still trade at single price-to-earning (P/E) ratio and, therefore, make good buy for investors, even as they said that there could be pockets of profit taking activities and possible price correction going forward.
Meanwhile investors’ gain at close of trading last weekend climbed to N2.1 trillion just last week with the market capitalisation of all listed equities soaring to N18.308 trillion from N16.207 trillion in the previous week.
The tightening of the bulls hold also saw the benchmark All Share Index (ASI) surge by 13 percent to 35,037.46 points, thereby, pushing the Month-to-Date (M/D) and Year-to-Date (Y/D) returns to 30.6 and 30.5 percent respectively.
The ASI had hit the stipulated five percent ceiling on Thursday, leading to activation of the circuit breaker for the first time since its introduction in 2016.
Breakdown of activities during the week, showed that investors’ interest in Dangote Sugar Refinery (+34.5%), Zenith Bank Plc (+21.8%), Nigerian Breweries (+21.4%), Airtel Africa Plc (+21.1%), BUA Cement (+20.9%), and Guaranty Trust Bank (+8.7%) joined to propel performance in the local bourse.
Activity level mirrored the upbeat performance, as volume surged by 117.3 percent week-on-week (w/w) while value spiked by 158.5 percent w/w to. 4.51 billion units and N58.73 billion respectively. Commenting, Mallam Garba Kurfi, Managing Director/CEO, APT Securities and Investment, said: “Most of our blue chip companies are still trading at the single PE ratio below what is obtainable in the frontier market.
Therefore, there is still room for improvement.” He, however, said that there would be profit taking from time to time and also projected some price corrections, but said that prices would continue to move up, nonetheless.
Agreeing with him, analysts at Cordros Capital, a Lagos-based investment banking firm, said: “In the short to medium term, we still see scope for expansion in valuation multiples as sub 1% yields on Treasury Bills will continue to engender re-jigging of portfolios towards equities.
“Considering the robust gains recorded across most counters over the past two months, we expect some profit-taking activities, albeit a short-lived one.” Just like the previous week, they stated that investors’ attention would be centred on quarter three (Q3) earnings yet to be published from the big banks.
David Adonri, Managing Director/CEO, Highcap Securities, however, said that the rally may not be sustainable owing to the weakness in the macro- economic environment.
He said: “The wild fire set off in the market as a result of the CBN’s expansionary monetary policy is still raging but may not be sustainable. “Sooner or later, correction will occur leading to a pull back. Fatigue will, definitely, set in very soon as the realities of economic malaise dawns on the market.
“Effective correction is anticipated after the market mops up the funds that will emanate from redemption of FGN bonds which will mature soon.”