The global economic and market outlook remain positive, even if unstable, due to geo-political uncertainties and the imbalanced monetary policy thrust of different central banks across the world. Also important is the fact that fiscal stimulus is taken centre stage once again to compliment monetary authorities in driving economic recovery and growth. This is despite the positive economic data emanating from developed economics and markets, the tension being generated by trade wars, the North Korean war threat, Italian political drama that is threatening the eurozone and global push-back on US tariffs.
The interest rate hike in U.S continues to put pressure on emerging and frontier markets as capital flow started to influence developing economies and their markets negatively. This was despite improvement in the commodities market, particularly oil prices that had rallied before it was halted last week on the strength of increasing expectation of an easing of the production cut agreed between the Organisation of Petroleum Exporting Countries (OPEC), as well as non-members like Russia that is equally a major producer.
However, falling inventories in the U.S boosted sentiments on oil prices by the end of the week, closing at $77.70 which was 1.6% higher than in the previous week, as the global economy goes the way of structural reforms. Expectations are that such reforms would support and sustain the growth trajectory again to boost stock and housing markets, while in the process restoring wealth and build sustainable confidence that drive international investments and business.
Back home, the seeming economic recovery mode will continue as we expect more of positive economic data and the eventual signing of the long awaited 2018 budget into law by President Muhammadu Buhari. This will then trigger the implementation of government’s Economic Recovery and Growth Plan (ERGP) that would hopefully complement efforts by the Central Bank of Nigeria (CBN) at boosting productivity needed to create employment. It would also reenergize the already slowing recovery as revealed by the 2018Q1 GDP that slowed down to 1.95%, from 2.11% in Q4 2017, just as the latest CBN PMI for May shows a slow-down in expansion at 56.5 points, compared to 56.9 points in April 2018. Reasons for this slowdown are not far-fetched, given the relative capital flow on the economy and the market.
OUTLOOK
In June, we expect that inflation data for May that would be released by the National Bureau of Statistics (NBS) to drop further; just as Purchasing Managers Index (PMI).
The March year-end accounts of quoted companies are expected to strengthen market fundamentals if the numbers beat expectations and are in line with Q1 earnings reports of the general market to further confirm improvements in the business environment. This is likely to support reversal after the market had suffered prolonged correction.
The low valuation in the market which selling pressure had so far ignored, signals early reversal in sight as many stocks are undervalued on the strength of their intrinsic value that should guide the investing public to know where to look while seeking to protect their capital and invest profitably for the rest of the year. What is sure is that when the market rebounds, those stocks with such hidden value (selling below their Book Value) are likely to attract the most attention, spiking huge price rally.
Traders and investors who understand the importance of combining fundaments and technical analysis in making investment decisions in the stock market should therefore take this opportunity of prolonged decline to position in some sectors for short, medium and long-term gains. These sectors include: Banking, consumer goods, industrial goods, service sector, as well as oil and gas, after a careful study of the recent price action pattern and based on fundamental data available to the market.
What to expect in June and July
• Release of March full year earnings as June is the end of the statutory 90-day for audited results. These numbers from blue-chip companies may strengthen market fundamentals, if positive.
• The oscillating trend of equity prices as a result of repositioning of portfolio along the line of positive numbers and rate of decline suffered so far.
• Market outlook for June remain mixed as the month has been in decline in two of the past four years. But there may be tie breaker this time, with the negative sentiment and losing momentum changing, as the market expects strengthening of economic recovery with the faithful implementation of 2018 budget, just as payment of government’s contractual obligations as promised flows into the system. Luckily, the CBN has so far sustained its intervention in the FX market, supporting the Naira and indeed, economic recovery which continues to impact business activities ahead of second half of the year as liquidity level is likely to rise due to spending in the days leading to the 2019 general elections.
• With the inflow, low Price to Earnings ratio in the market may trigger more demand for stocks. However, do ensure you 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. Especially following investdata sentiment reports
• Let numbers released by companies guide your decision and how long you stay in a position.
• Being the last month of the second quarter and first half of the year, activities are likely to look up as players, including fund managers, institutional investors reposition for Q2 earnings season and second half of the year.
• To help you navigate the seeming dangerous waters that Nigerian investment market has become, what out for the upcoming Investdata comprehensive stock market trading and investing workshop. There, you would learn short-term trading strategies and how to identify defensive stocks for such times as this.
With Nigeria’s economic recovery slowing down, there is need for the government’s economic managers and policy makers to review the nation’s structural reform plans and implementation methods. They may need to look critically, especially, into the style of fund disbursement for executing, particularly those with direct bearing on the economy.
Hastening to settle contractor debts and other contractual obligations, as planned, will further boost economic activities and drive growth as beneficiaries would then be able to repay bank loans most of which are already qualitied as bad and doubtful, according to Prudential Guidelines. This is in addition to quicken Presidential assent to the already delayed 2018 budget to put back on track economic recovery and growth, which is already under-performing according to the plan outlined.
In doing this, there is need for a meeting point between the fiscal and monetary authorities to enhance growth and development, a key aspect of which is the need to attract capital inflow to drive the economy or making funds cheaper to drive expansion and create jobs. Notwithstanding the slowdown in economic recovery, our positive outlook of sustained improvements in future is high going by the rise in oil prices and its impact on government revenue.
As the market phase is changing, this is time to combine fundamentals and technical tools for enhanced decision taking through knowing the support and resistant levels of stocks being eyed so as to reposition or take the exit door.
Since every stock market is a cycle, you must know it is at the moment, or at what point particular stocks therein are to successfully manage your trading and investment risks. For stocks that ought to be on your shopping list in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
Meanwhile, get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the Chart Summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.
Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
