Investors are expected to trade cautiously this week following the release of earnings particularly from banking heavyweights such as Guaranty Trust (GT) Bank, Zenith Bank and Access Bank.
“This week the markets may still be influenced by the outcome of the Monetary Policy Committee (MPC) last week, which increased the cash reserve ratio for the public sector fund from 12 per cent to 50 per cent. We are expecting the Federal Reserve Bank to meet on rate decisions, we don’t expect anything different from what they had last time,” FSDH Merchant Bank Limited Head of Research Ayodele Akinwunmi told CNBC Africa on Monday.
The outcome of the MPC meeting last week is expected to influence their results and market activity. Last week Nigeria’s MPC kept its monetary policy rate at 12 per cent for the 11th time in a row.
“We don’t expect so much growth in terms of earnings from these banks this year, looking at what they did last year, and the fact that yield on the securities have really gone down,” Akinwunmi explained.
“This year we don’t expect too much growth from them but then if you look at the current prices of these banks’ ratios, they’re actually undervalued but I think the current market sentiment may still prevail over earnings released this week.”
Nigeria’s largest cement manufacturing company Dangote Cement is one of the many stocks investors are expected to keep an eye on this week as their current earnings remain strong. Access Bank, Skye Bank, Diamond Bank, GT Bank and Zenith Bank are other key stocks for the week. Majority of these banks’ stocks are currently trading below intrinsic value.
“Investors who a have medium to long term view should actually position [themselves] in these banking stocks and maybe towards the end of August and the last quarter of the year, I think they will likely reap good dividends and earnings,” said Akinwunmi.