Investors brief: these milky stocks are cuddling amazing gains.

Now, there are few sick stocks, and investors are taking position. This is not the year for you not to be in the stock market.

The equities market ongoing rally in January is sweetening many investors, some are adjusting portfolios, and others are taking positions.

There are stocks that have gained more than 30% and the projection is that excess liquidity would still find its ways to the equity market – all things being equal.

As an example, Law Union and Rock Plc (www.lawunioninsurance.com) has gained 38% in January alone. The insurance company stock opened at 50 kobo this year, but it traded at 69 kobo as at yesterday.

If you had put N1 million into this stock, in less than 30 days, you would have made N380, 000 gain.

Beta Glass (www.frigoglass.com) is the major supplier of glass packaging in the emerging markets of West Africa did 31% return year to date.

The stock which opened at N53.80 is not trading at N70. If you had placed N1 million in this stock, you would have made N310, 000.

WAPCO (www.lafarge.com.ng) is also an investors pick which has returned 27.5% year to date. The stock opened at N15.30 then moved up to N17.60 as at yesterday. Investors that bought the stock with N1 million this January would have gained N275, 000 by now.

Just as Dangote Cement Plc. (www.dangotecement.com) stock has appreciated by 26.69% in January. If you had bought this stock in January, it would have delivered about N270, 000.

Would this trend continue?

It depends on happening at the alternative segment in the financial market. Fixed income was bullish for 3-4 years, while stock market suffered.

Money, as wealth managers often say, goes to where it is treated well. For now, yields are low, and liquidity is approaching excess zone.

Wealth managers believe that it cost money to save money.

CBN hawkish bias

The Central Bank of Nigeria hawkish bias, and associated low yield on fixed income securities is supporting the uptrend in the local bourse.

Some equity analysts are also saying that as long as CBN keeps rate down in the fixed income segment, especially with the ban on its open market operation, there would be strong rally.

Yield graph

But would CBN toll this path?

It is more likely, looking at the pattern of regulations. Apex bank has raised regulatory bar, and this would apparently impact deposit money banks earnings in the year.

Then, with the recent increase in cash reserve ratio, it looks like the CBN is contradicting itself. How, you may ask.

At 27.5% CRR, it means for every N100 deposits collected, banks would have access to just 72.5% to do business.

However, co-join with another apex bank requirement for loan to deposit ratio of 65%, banks vaults would automatically thin down.

What that means for banks is that, after the CBN sterilise 27.7% of fund available to banks, it is asking them to give out N65 out of every N72.5 available deposits to the real sector.

Many equity analysts are of the view that stock market would be bullish in the first quarter. The performance equities would be further supported in the quarter as earning season comes.

Talk to your stock brokers or call us for recommendation.

Investors brief: By Julius Alagbe