|The Managing Director /CEO, Highcap Securities Limited, David Adonri has attributed the failure of companies in the insurance sector to pay dividends, the inability of some stocks to trade above the par value of five Kobo among major reasons to investors’ apathy to the stocks on The Nigerian Stock Exchange (NSE).
He said most investors like to invest in a company that pays dividends regularly and at an increasing rate, saying some companies that fall below such standards are not likely to perform well.
Adonri noted that with the recent financial results coming from some banks such as the First bank that released impressive financial results to The Exchange recently, investors are likely to increase their stakes in the banking sector.
He noted that insurance sector was badly affected by the COVID-19 pandemic and stressed that despite the recovery, Nigeria and the rest of the world are witnessing lockdown in without any sign of recovery.
“The sector was seriously damaged during the lockdown. A lot of insurance stocks find it difficult to recover and that was why the National Insurance Commission (NICOM) asked them to recapitalize. But the recapitalization has also been funny because of the economic situation.
“It is still, a delicate sector, and investors are very careful to take a position in those stocks. The sector has not given an indication that it’s capable of attracting investors in comparison to the sectors that are recovering like banking, telcos, and others. But if they can now come out to be paying dividends, the insurance sector will be attractive to investors”, Adonri stated.
Meanwhile, Adonri expressed hope that some banks are also expected to release impressive financial performance this February because some of them have released better financial results when compared to that of the previous results. “That alone is likely to change investors’ perception for First Bank stocks. Ecobank has been a laggard for some time but it has also done very well in its reports. Access bank has been blowing hot and cold but coming out with impressive financial results. Although, investors are still very skeptical and careful about how they position themselves for Access Bank stocks. There are other banks’ results investors are expecting to perform very well before they can take a position like Union Bank, Guaranty, Fidelity among others”, said Adonri.
He said after the first MPC meeting for the year, CBN also retained all monetary parameters with a pledge to retain them so as to continue with the expansionary motive of the MPC to assist the real production sector of the economy and also the equities market. “If that policy remains, it means the rally in the capital market can be sustained”, Adonri said.
Adonri also picked a hole in the CBN monetary policy, saying that the policy, if not well maintained by regulators could lead to poverty in the country.
“But the only problem that is coming from that policy is that if the government can’t manage stagflation, it will cause a lot of problems that can result in poverty. And if properly managed, then the rally is also sustainable for future trading activities.
“ The world is gradually recovering from the Covid-19 pandemic coupled with good company results that are coming are also pointers to its sustainability. “Most of these financial results are very impressive contrary to our expectations. The more these good financial results are coming, the better for the capital market”, Adonri explained.