Investors Interpret Company Financials, Economic Data Ahead Of 2018 Outlook, Positioning

Market Roundup for October

The last quarter of 2017 started on a positive note on Wednesday, reversing two consecutive months of bear transition as it closed higher on bullish sentiment helped by the torrents of impressive corporate earnings reports released over the past 15 days to coincide with the regulatory deadline for submission in line with the post-listing requirement of the Nigerian Stock Exchange (NSE).
Despite the relatively weak liquidity in the market and continued profit taking that has dominated the market in recent years, fiscal policies and the needed stimulus to hasten economic recovery are not clear enough to give direction or impact the citizenry by strengthening their purchasing power going by the implementation of 2017 budget has not reflected on the economy much to complement the monetary policies. Of particular importance is that the huge amount budgeted for infrastructural development to drive and strengthen economic fundamentals to boost national output are still very sluggish. For emphasis, there is no good road network for movement of goods and services to the market, which has made cost of goods prohibitive, in addition to high cost of production that almost crippled the manufacturing sector, until the Central Bank of Nigeria (CBN) started intervening in the foreign exchange segment of the inter-bank market. This has brought great relief to operators in the nation’s manufacturing sector, a situation that is reflected in the positive numbers posted so far. This means that other complementary infrastructures like power, road, water and low interest rate will boost the sector, leading to provision of more jobs and enhanced living condition for the people.
Despite the relatively weak market response to the positive numbers as at released dates which is an evidence of low liquidity as mentioned earlier, the Q3 numbers of the companies have revealed the possibility of prices remaining northward, just as investors would be assured of juicier reward in the form of dividend when the full-year score-cards begin to flow into the market in the early days of 2018.
Discerning investors and traders should take advantage of the year-end season and cycle to grow their income ahead of major earnings season in first quarter of 2018.
In the 21 trading sessions of October, the market was up in 12 and down in nine, wiping out two months of loss, following which year-to-date gain stood at 36.49%, attributable to factors mentioned above, making the Nigerian stock market one of the best performing of the MSCI Frontier markets, in Africa and across the globe. The improvement in numbers presented by the listed companies, as well as their fundamentals and recovery of the economy made Nigerian equities attractive; many remain undervalued, offering a high margin of safety.
Meanwhile, the composite NSE All-Share Index in the month gained a total of 1,240.31 basis points, closing at 36,680.29 after touching a high of 37,041.52 and low of 35,155.08 within the period, compared to the 35.439.98 at which it opened. This represented a 3.50% growth over the period on a strong buy-market position that impacted on stock prices to rebound from the two months pullback.
The buying volume of total transactions was 81%, and selling position, 19% to usher another bull-run in the last quarter of the year, while volume index for the period was 0.93. Market capitalisation gained N478.01bn to close higher at N12.69tr, from N12.22tr, representing a 3.91% appreciation in value. The market rebounded on impressive numbers as foreign investors maintain their position in the market in what may seem many of them not wanting to be caught napping when the market begins to react more positively to the recovery and macro-economic data being released.
Traded volume for the month was up 43.61% to 5.73bn shares, as against 3.99bn units recorded in the preceding month.
The ASI’s year-to-date gain stood at 36.50%, just as market capitalisation for the same period adjusted up to N3.45tr, representing a 37.29% gain YTD from the opening value.
Market breadth for the month was positive with the advancers outnumbering decliners in the ratio of 49:28 to halt the two months down market that was as a result of profit taking.

Premium, Banking Take Lead

The sectoral performance chart below shows that NSE Premium and Banking indices drove the market the most in the month under review. While, the Premium index gained 5.99%, driven by price movement in Dangote cement, Zenith Bank and FBNH, the banking index notched 5.33%, outperforming the composite NSE All-Share Index during the period. It was followed by the NSE Pension index which rose by 4.70% to reflect the performance of dividend paying stocks on the exchange, while the NSE 50 and 30 indices climbed 3.69% and 3.36% up respectively, revealing investors’ interest in blue-chip stocks, amidst the low Price-To-Earnings attraction.
Other sectors that closed up during the month were: The NSE Lotus, NSE Industrial Goods, NSE Main Board, NSE Oil/Gas and the NSE Asem.
Sectoral indexes that closed in the red included NSE Insurance and NSE Consumer Goods, which shedding 0.49% and 0.33% respectively, creating opportunities for investors and traders to position owing to their improved earnings that continue to boost confidence in the sectors.



Best And Worst Performing

The month’s best performing stocks was Dangote Flour, which rallied on the strength of strong numbers and expected cyclical rally as the year winds down. It gained 49.37% of its opening price and was followed by its sister company- National Salt, which appreciated by 34.78%; ahead of International Breweries’ 32.41% notch, while conglomerates- UACN climbed 25.27%, despite its mixed numbers went; and Linkage Assurance, 24.64%; among others.
Consumer Goods stocks and other low/medium caps on the top gainers table for the month included: Caverton with 21.15%; Learn Africa 18.92%, Flourmills, 18.64%, Vitafoam, 18.33% and CCNN, 16.03%; among others.


Source; Investdata Research

Worst performing stocks for the period was led by Law Union & Rock Insurance, which lost 23.66% of its opening price during month, amidst profit taking and mixed performance in the recent numbers released; Forte Oil lost 19.84% also as a result of its mixed performance; just as Jaiz Bank declined by 17.14%. University press closed 16.34% lower for the month; just as Cutix dropped 16.00% on the back of profit taking after price adjustment for dividend proposed.


Source: Investdata Research

Where To Invest And Expectations For November, December
The global economy recorded stronger recovery and growth, helped by the recent positive data emanating from the developed world, especially the rising price of commodities, particularly crude oil and others, despite uncertainties here and there as a result geopolitical issues, added to North Korea’s missile threat that remains a cause for concern among investors.
Back home, the recent corporate earnings of listed companies confirm the positive macro-economic data that confirms the fact that Nigeria is finally out of recession, growing by 0.55% as shown in the Q2 GDP figure released by the National Bureau of Statistics (NBS). This is besides the declining inflation rate, although slower than expected; Just as Purchasing Managers Index recorded the most significant jump so far at 64.8 in October, from the previous month’s 58.5, helped by the Central Bank of Nigeria’s intervention, export inflow, oil companies and financial institutions, that supported the relative stability in exchange rate and continued to attract inflow and impact positively on the domestic economy.
In November, we expect inflation for the month of October to continue its gradual downward movement; just as the PMI improves again to further support the recovery in Nigeria’s manufacturing sector as Q3 numbers from the sector beat market and analysts expectation.
With only few quarterly earnings expected in this month, only investors and analysts are expected to reposition and balance their portfolios ahead of full year earnings in 2018, based on their interpretation of the scorecards and changes that will keep the market oscillating.
The Q3 numbers are expected to strengthen market fundamentals as the business environment continues to look up, while the low valuation of stocks, despite their huge intrinsic value remains a plus and should guide investors to know where to look while seeking to invest profitably for the rest of the year and beyond.
Traders and investors who understand the importance of combining fundaments and technical analysis in making investment decisions in the stock market should take this opportunity of any pullback in prices to position in some sectors for short, medium and long term gains, especially in the fast moving consumer goods, banking, agribusiness, building material and healthcare after carefully study of the recent price pattern and fundamental data available in the market.

What to expect in November and December
• Seasonal trending as few quarterly numbers are expected and there will be impact. However, blue-chip companies will continue to oscillate on the strength of company and market fundamentals as repositioning and rebalancing stays till end of the year.
• The oscillating trend of equity prices as a result of repositioning of portfolio along the line of positive numbers by foreign and local investors will boost activities in the remaining months of the year.
• Market outlook for the new month remain mixed as few quarterly and no full year earnings are expected. But positive sentiments and strong momentum may not be out of place as the market expects the economic recovery to be strengthened with the last hour implementation of 2017 budget.
• The relative low price to earnings in the market may further attract demand for stocks, but invest wisely, using bids, offers and volume when taking decisions as a trader.
• Managing risk and protecting capital at this point is very important, so you will be able to determine when to buy or sell, by watching the stocks and the market, using technical analysis.
• Let numbers released by companies guide you decision and time to stay in that position.

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Best regards,
Ambrose Omordion
CRO | Investdata Consulting Ltd

info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
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