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Profit taking in banking stocks drags down equities

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Stock exchange
Nigerian Stock Exchange

as investors reposition ahead of Q3 earnings

Trading of shares on the

Nigerian Stock Exchange, NSE was mixed as profit-taking in banking stocks for the better part of last week offset bargain buying at the end of the week.

Analysts have stated that investors are repositioning for third quarter, Q3’20, earnings especially for stocks that may benefit from the recent hike in prices of petrol and others with strong fundamentals.

Analysts at InvestData Limited explained, “Discerning investors and traders are cashing in on the opportunities expected from the hike electricity tariff and the pump price of fuel by the Federal Government, who many accuse of offering palliatives or stimulus packages with one hand, and while it is yet to reach the target beneficiaries, collecting same by way of the price hikes expected to bloat prices of goods and services across the country.

READ ALSOWe’ll fight hike in price of fuel, electricity tariff, Labour insists

“Those investors and traders are taking position in sectors they perceive would likely benefit from the hikes directly or indirectly, especially utility and petroleum marketing companies.’’

One way the hike in fuel price could be advantageous, they note, is that it will reduce the mountain of non-performing loans in the banking industry linked to petroleum products marketers and power generation and distribution companies.

Reacting to market performance as well, analysts at Cordros Capital said: “Our view continues to favourcautious trading as risks remain in the horizon due to a combination of the threat of resurgence in the number of COVID-19 cases in Nigeria and weak economic conditions. ‘‘Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks.”

In their comments, analysts at Cowry Asset Management Limited said: “In the new week, we expect the domestic equities market to remain upbeat as investors renew their position in Tier 1 banks in order to qualify for the interim dividend – most of the bank’s qualification dates fall between September 16th and 18th. However, we expect our clients to trade cautiously as prices may retract after qualification dates.

Reacting as well analysts at analysts at AfrinvestResearch said: “In this week, we expect the bearish momentum to persist in the absence of any major catalyst.”

Meanwhile, analysis of trading last week showed that selloffs of Guaranty Trust Bank, GTBank  (-5.8 percent), UBA (-3.9 percent ) and Zenith Bank (-1.2 ) percent dragged the NSE All Share Index 0.05 percent  lower, Week on Week, W-o-W  to 25,591.95 points.

Consequently, the Year to Date, YtD loss increased to -4.7 percent. Performance across sectors was broadly negative with the Banking (-2.7 percent), Oil & Gas (-1.3 percent), Insurance (-0.7percent), and Consumer Goods (-0.3 percent) indices all closing lower. The Industrial Goods (0.4 percent) index was the sole gainer.

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