The banking stocks seems to have benefited most from the price appreciation this week, this is not unconnected to the availability of liquid stocks in the sector – stocks you can easily buy today and sell off without worries – which is no doubt a major factor fund managers look for before selecting potential stocks to invest.
According to NSE weekly report, a total turnover of 1.567 billion shares worth N20.559 billion in 18,396 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 1.139 billion shares valued at N12.692 billion that exchanged hands last week in 17,109 deals.
Here is the point: The Financial Services industry (measured by volume) led the activity chart with 1.178 billion shares valued at N9.180 billion traded in 9,900 deals; thus contributing 75.14% and 44.65% to the
total equity turnover volume and value respectively. This tells us that most funds are invested in the banking, insurance and financial related stocks.
Why? I think the recent CBN monetary policy, which has shot the windows of opportunities in the fixed income market, is leaving everyone with no option than to buy stocks. Funds that would have been invested in fixed deposits, treasury bills and bonds are being channelled into fundamentally sound, high-yield dividend stocks – and financial stocks are receiving the highest patronage as evident in the NSE weekly report.
While the banking sector index is down by 15.23% on a year to date, quarterly, monthly and weekly data (which are up by 7.28%, 3.67% and 3.59% respectively) are reflecting the expected bullish run on CBN’s policy directives. Since banks are now lowering their minimum savings deposit rate to 1.15% per annum (10% of the new MPR of 11.5%), their cost of funds should also go down to reflect the recent changes, hence push net interest income.
Although this may not rub off on all banks, I think the big tier banks that already have low-cost fund and effective loan risk management policies will benefit most from this trend. One of the banks to watch going forward is GTB.Continue reading “Yes! GTB Stock Will Appreciate to N30”