The month of June is the third month of the second quarter of 2020 and the month met the partial lockdown on the economy as a result of the effect of the covid-19 pandemic.
Three months of capacity underutilization will surely have a negative reverberating effect on the productivity of firms for this period. This effect will not be sector specific and as such even the banks will not be spared.
Against this backdrop, the Q2 financials of quoted companies on the floor of the Nigerian Stock Exchange may fall short of the market expectation, which will be a slow down against the corresponding period, i.e. Q2 2019. The effect will cut across boards touching major indices in the likes of Turnover, Profit Before Tax, Profit After Tax and Earnings Per Share.
The market hates a decline in performance; even if it does not constitute a loss position, the market always expects growth from quarter to quarter. If that is true and comes to hold, that is most firms coming to tie market with slow down earnings, the market will see it as a trend and will adequately re-price stocks according.
The market’s direction for the week ended June 11, 2020 was northwards at the end of the day as the ASI returned 67 basis points to close the week but the closing of the ASI during the week was mixed as it witnessed two days gains and two days losses.
The holiday and weekend effect set in on Thursday which saw most of the stocks succumbing to sell pressure and most banking stocks’ were victims.
The pharmaceuticals are still having a field day in the market and the market is specifically ready to re-price Neimeth to be at par with its peers. The stock was trading at N0.62 in January 2, 2020 and closed the market at N2.57 on Friday with a return of 314.5%. Has the market concluded on its price? That will be determined in the course of the new week.
Prestige Assurance rose from N0.59 to N0.77k during the week as a result of the bonus issue declared by the organization but because bonus is not a strong force as dividend, the stock could not maintain the tempo and came to a close at N0.70.
Market’s temporal momentum entered into Mutual Benefit Assurance as a result of its growth in earning per share from their Audited 2019 financials from N0.14 to N0.36 which represents 157% growth and an earnings yield of 180% and it touched N0.26 on Friday and later settled at N0.22 from N0.20
Unity Bank appeared in the gainers list as it has entered into profitability by recovering from a negative EPS of (N0.6583k) to N0.2894 representing a growth of 144%.
Berger paints is trading cum div with an outstanding dividend of N0.25.
A cursory look at the top ten losers speaks volume about the mood of the market. Apart from 11plc, all the stocks on the losers chart are low cap stocks trading between N0.20 and N5.00. This means that investors are trading with absolute caution. We can recall that the new board lot needed to move any stock up or down is 100,000 units and this doesn’t comes easy in the case of midcap and high cap stocks. 100,000 units of Dangote Cement, Seplat and Nestle are very substantial and are not a common place.
Going by the conclusion of most analysts for a possible recession around the corner, cautious trading should be the watch word going forwards until we begin to see Q2 results and the way and manner the market will react to and treat them