Q3 ’13 - High expectations as Financial Sector counts on Banking Stocks

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Wednesday, 26 June 2013 / TheAnalyst
 

The financial sector of the Nigerian bourse recorded moderate gains of +14.69% (average) to date in the year as at June 21 2013; far below our expectation as investors maintained active focus towards value and blue chip stocks only.
 

Meanwhile, majority of the sub-sectors with the exception of the banking sub-sector posted unimpressive returns, keeping the sector below analyst expectation.
 

This overall financial sector performance reflects a continuing pattern whose outlook in the coming quarters is unlikely to change even when speculative trades appears set to dominate trades as short termist set out to dictate the trend amid likely huge swings. This suggests a heavily speculative and bumpy H2, particularly in the Insurance, Mortgage and other Financial sub-sectors that have not recorded impressive returns to date.
 

We remain cautiously optimistic towards the quarter (Q3’13) as likely impressive earnings reports in the sector might provide the game changer, which may have a rub-on effect on equities across the sub-sectors.
 

A break-down analysis of the sector reveals the banking sub-sector reported an impressive average returns of +31.55% which has put the sub-sector on all investment watch list; which might account for the impressive patronage in the sub-sector equities which is expected to rollover into coming sessions as the profit-taking season comes to an end.
 

In the face of expected bumpy trend in Q3’13, we expect steady bargains and moderate accumulation in the banking sub-sector - being the key driver of market turnover.
 

Also, anticipatory bargains towards the value and blue chip stocks in the sub-sector would stoke the expected moderate rally in the sub-sector, in addition to the fact that the prices of the sub-sector’s leader appeared weathered at the moment due to recent market price corrections - this may jump-start the expected rally in the early stages of the next quarter in financial sector.
 

Finally, H1 2013 earnings report(s) coupled with the expectation of likely interim rewards may provide added momentum to price movements in the banking sub-sector.
 

The table below reveals how financial sector has feared so far in the current year

 

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