The global economy recorded weak growth over the past month, as revealed by recent mixed macro-economic data emanating from the developed world, especially as manufacturing indexes and GDP figures from US, China, and Europe at 1.92%, 6% and 0.20%, slower, a decline and even flat growth respectively.
The impact of the lingering trade dispute between the world’s biggest economies has continued to reflect in the form of oscillating commodity prices, particularly in crude oil. Improvements in manufacturing activities due to stimulus packages and a rate cut in the midst of economic slowdown and weaker Q3 GDP numbers, besides the mixed sentiments in stock markets, are likely to turn positive given that the monetary policy slants of central banks are now targeted at boosting national productivity and growth.
Back home, it was another bearish and volatile week and month of October on the Nigerian Stock Exchange (NSE), as prices suffered further decline and in the process, created more opportunities for high upside profit potential among discerning traders and investors. They have, therefore, continued taking advantage of the current undervalued nature of the market to position ahead of the earnings season.
Given this scenario, the market is likely to stage a reversal in the months ahead, as the government begins to do the needful and improve economic fundamentals necessary to drive and support national productivity and growth. With the just concluded earnings season despite the mixed performance, the profitability level of many companies can still support a price rally and high dividend payout, due to the current low prices.
Technically the current market and economic scenario are not different from what they were in 2016. The difference is however that we are not in a recession, as the gross domestic product (GDP) remain positive on a slower growth, even as corporate earnings are not as bad as they were between 2015 and 2016, when the Central Bank of Nigeria (CBN) intervened early in 2017 by way of foreign exchange policy reforms that brought relative stability to the nation’s currency, while triggering inflows that supported the 2017 recovery. The current equity prices are almost at the same level as 2016. The market has suffered losses since early 2018, owing to reasons ranging from uncertainties arising from the 2019 general elections to the weak economy, the prevailing low liquidity and confidence levels.
As mentioned earlier, the recently released quarterly corporate earnings of listed companies as of September 30, 2019, confirm Nigeria’s mixed macro-economic situation, revealing the slow growth, with the Q2 GDP figure rising by just 1.94% as shown in the 2019Q2 data published by the National Bureau of Statistics (NBS). This is besides the resurgence in September inflation of 11.24%, after touching 11.02% in August, its lowest in five years; just as Purchasing Managers Index recorded expansion in the manufacturing activities at 58.2 points in October, from the previous month’s 57.7 point, helped by the Central Bank of Nigeria’s intervention, and increasing activities in preparation for the oncoming festivities in the last quarter of the year.
In November, we expect inflation for the month of October to continue its gradual uptrend movement as a result of the border closure, implementation of new minimum wage and expected increased consumption in view of the festive period. It is also expected that the Purchasing Managers’ Index would improve again to further support the recovery in Nigeria’s manufacturing sector, despite the unimpressive Q3 numbers from the sector which were below market and analysts’ expectations.
With only a few quarterly earnings remaining, market players are expected to reposition and balance their portfolios ahead of full-year earnings in the first quarter of 2020. This will, however, be based on their interpretation of the recently released scorecards and changes that will keep the market oscillating.
The Q3 numbers are expected to strengthen market fundamentals, given that stock prices are low and the business environment will likely lookup. The huge intrinsic value in the market at this period is a plus and should guide investors to know where to look while seeking to invest profitably for the rest of the year and beyond. The market’s Price to Earnings Ratio of 7.1x shows how cheap equities are selling at the exchange because it is below the average PE ratios of 15.6x and 13.7x in BRICS and Africa markets respectively. Even below the price to earnings ratio of 12.0x in 2016 and 9.2x in 2018.
NSEASI WEEKLY TIME FRAME CHART
The NSE Index in 2017 recorded a gain of 42.3% on seeming improvements in economic fundamentals that helped the exit from recession on the CBN’s exchange policy and intervention that attracted inflows after the market had witnessed declines for three consecutive years. The market, owing to a two-year pullback has lost 41.99%, almost all of its gains in 2017, from the high of 45,321.8 basis points in January 26, 2018 to November 1, position of 26,293.30bps, thereby creating opportunities for more profit at lower risks as the CBN’s unconventional policy and directives will likely boost liquidity in the coming months.
Traders and investors who understand the importance of combining fundaments and technical analysis in making investment decisions in the stock market should take the opportunity of any pullback in prices to position in some sectors for short, medium and long term gains, especially in the new sectors, like Telecommunication and Services. Others are banking, agribusiness, building material, and oil/Gas after careful 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 an impact. However, blue-chip companies will continue to oscillate on the strength of company and market fundamentals as repositioning and rebalancing continue till year-end.
• The oscillating trend of equity prices as a result of the repositioning of portfolios 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 remains mixed as few quarterly earnings still being 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 the 2019 budget.
• The relatively low price to earnings in the market may further attract demand for stocks. But then, invest wisely, using bids, offers, and volume, when making decisions as a trader.
• Managing risk and protecting capital at this point is very important, so you can determine when to buy or sell by watching stocks and the market, using technical analysis.
• Let numbers released by the various companies guide your decision and time to stay in that position.
INVEST 2020: Opportunities and Trade Ideas Summit
A. Recession or Boom: Five Trading Strategies For Picking Best Stocks In Good Times or Bad-
B. 2020 Global/Nigeria Macro-Economic Outlook & Sectors To Position,
C. Critical Chart Patterns For Pinpointing Stocks That Could Explode Higher In 2020-
D. Keys To Identify Opportunities In Stocks, Exchange Traded Fund (ETF) Fixed Income and Commodities Markets In Any Market Environment.
E. Mastering Earnings & Dividend Game Plan For 2020 Investing Opportunity & Beyond-
Over the years, we have received requests from our followers, concerning our annual Traders & Investors Summit scheduled for December, where experts and analysts would x-ray investment and trading opportunities in the New Year.
At the forthcoming summit, participants would:
• Learn from some of the best professionals in the market
• Share Trading ideas and investment opportunity/strategies
• Offer opportunities to network with peer value investors and investment professionals who share your passion for investing
• Understand more about using Investdata Buy & Sell Signal setup strategies and research tools to improve outcomes
• Pinpointing chart patterns for Profitable Trades and investing opportunities in an uncertain market environment
• Investment analysis and theses behind these ideas
• Special Earnings and Dividend Game Plan for 2020 investment opportunities
• Understanding the changing economy and trend for profitable investment
• How successful value fund managers research into and evaluate companies
• Exclusive insight and actionable value strategies from world-class professional Traders
• Over 10 Trading and investing tips for identifying undervalued Stocks you can buy now
Date: December 7, 2019
Venue: Ostra Hall & Hotels Ltd, Off Otunba Jobi Fele Way, Opposite NNPC Gas Plant C.B.D, Alausa, Ikeja Lagos, Nigeria.
However, with less than 65days into the year 2020, you need to start planning now because it is either you plan to succeed in 2020 or you don’t decide. Instead, you fold your hands means you are planning to fail. So, this practical summit is first of its kind because a team of experts will be revealing pure practical trade ideas and opportunities in 2020 to recoup your losses and maximize returns no theory. That is, what you can apply or implement immediately and start tracking the result by yourself.
Want to be among the successful investors and traders in 2020 send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467