Prudential (LON: PRU) share price has been among the worst-performing in the UK after the insurance company published weak results last week. The stock has slipped in the past four straight days and is trading at the lowest level since November 30th of this year.
Prudential faces significant challenges
Prudential published relatively weak financial results last week. In its financial results, the company said that its new business profit retreated by 14% in 2022 to $2.18 billion. Its operating free surplus rose by just 6% to $2.19 billion while its profit after tax dropped by over 55% to $1 billion.
The company faces significant challenges. The most important challenge is the performance of its Africa business. Recent data shows that most African companies, including heavyweights like Nigeria and South Africa are going through a rough patch as the Fed continues to hike interest rates.
Countries like Nigeria, Kenya, and Ghana are all facing a significant dollar shortage and devaluation of their currencies. As I wrote here, the Nigerian naira has dropped to a record low against the US dollar and other currencies.
The same situation is playing in Kenya, where the Kenyan shilling has crashed to about 150 against the US dollar. It was at 100 before the Covid-19. Worse, banks are actively limiting the amount of US dollars they are extending to individuals and companies.
Ghana has been one of the worst-performing African countries this year after it defaulted on its debt. Unfortunately, the situation will continue getting worse for most African countries.
This could see the level of Africa’s unemployment rate jump. Most importantly, this could impact the company’s earnings, which are usually in dollars.
This trend will nonetheless be offset by the performance in key Asian countries like China, Indonesia, and Malaysia. Mainland China and Hong Kong are expected to bounce back after last year’s Covid restrictions.
Prudential share price forecast
So, is it safe to buy Prudential shares? The daily chart shows that the PRU stock price has been in a strong bearish trend after it published its financial results. It has moved to the lowest level on November 30th. The shares have moved below the 50-day and 100-day exponential moving average (EMA). These two averages are about to make a bearish crossover.
At the same time, the MACD has moved below the neutral point while the MACD have continued slipping. Therefore, the stock will likely continue falling as sellers target the key support at 790p.
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