2017 Q1 MARKET ROUNDUP: CAPITALISATION SHEDS N417.97BN, INDEX DOWN 5.1%

No doubt, the first quarter of 2017, which ended last Friday, was a bad one for the bulls on the floor of the Nigerian Stock Exchange as it closed negative to finished its third consecutive quarter of down market on bearish sentiments, resulting from the socio-political instability, low confidence, weak macro-economic, lack of strategic economic reforms plan.

The Federal Government only recently unveiled its much awaited Economic Recovery and Growth Plan, which has generated so much debate for and against, but waiting for implementation amidst cautious optimism on the side of analysts. Perhaps an even more significant draw-back is the failure of the government to get its 2017 budget or spending plan approved by the National Assembly, following which the Federal Government, on Friday announced an extension of the lifespan of the 2016 budget’s capital expenditure to the end of this month.

 

Meanwhile, the composite NSE All Share Index for the first quarter of the year shed 1,358.28 point to close at 25,516.34 points from the opening figure of 26,874.62 points, representing a 5.1% drop on a huge volume of 14.55bn shares traded by stockbrokers, from previous quarter’s 14.89bn shares transacted. 

The buying volume of total transactions for the period was 42%, while selling position was 58% to continue the three quarters bear market. Similarly, market capitalisation for the period lost N417.97bn, closing lower at N8.83 trillion, from an opening value of N9.25bn, representing 4.54% depreciation in value, in an earnings season with mixed sentiments as a result of unstable socio-political business environment.

 

The weak corporate earnings released, especially towards the end of the quarter did not impact market fundamentals, as many companies reported declining numbers, leading to low payouts and even non-payment of dividend in many cases.

It is however noteworthy that the Central Bank of Nigeria (CBN) recently reviewed its foreign exchange policy, driving national output, resulting in the forex market intervention, thereby closing the gap between the interbank and black market rate to stabilized prices and control imported inflation. Within the period under review, the nation’s inflation figures declined for the first time in 15 months to reflect the impact of actions taken by the monetary authority in the forex market.

This did not have much influence on the equities’ market as cautious trading and investing continued during the period, as impacts of the economic recession remained obvious on the numbers posted by the various companies.  

Meanwhile, market breadth for the period remained negative and weak as the number of decliners outpaced advancers in the ratio of 64:31 to continue the bearish transition of three consecutive quarters to reverse the bullish second quarter of 2016, after which it has been trending down with pattern of two months bear market and one up market ever since.

As shown in the sectoral performance chart below, Consumers Goods depressed the market the most in the quarter under review, shedding 11.91%, more than double the loss by the NSEASI. It was followed by Oil/Gas that lost 6.48%, while NSE Premium dropped 3.62%. Other sectors that were down were: Insurance, Banking and Pension. On the upside, the only sector that was up on the quarter was Industrial Goods with 0.07%.  

 

The tables below list the best and worst performing stocks during the quarter.  Of the 64 stocks that suffered various levels of decline, 15 lost over 18% of their share price, with Forte Oil as the biggest laggard, having shed 45.39% due to its declining earnings power and failure to declare a dividend, which may not be unrelated to the performance of the capital intensive nature of the various segments of its operations, particularly the power business. FO was followed by UACN Property Development with 37.79%, which had earlier given a profit warning, before finally posting a loss account for the 2016 financial year.  With Oil/Gas  stocks dragging the market lower, it shouldn’t come as too much of a surprise that nine of the market’s worst performing stocks for the period were from the manufacturing  sector, led by 7-Up Bottling Company, with 35.55% slide; and Guinness Nigeria, 27.14%; among others.

Worst Performing Stocks in Q1 2017
Securities	Sector	Open	Close	% Change
Forte Oil	Oil/Gas	84.43	47.8	-43.39
UACN Property	Const/Real Estate	2.62	1.63	-37.79
7-Up	Consumer Goods	129	83	-35.66
NAHCo	Service	3.16	2.1	-33.54
Livestock Feeds	Agribusiness	0.84	0.59	-29.76
Guinness	Consumer Goods	83.05	60.51	-27.14
NEM	Insurance	1.05	0.8	-23.81
UACN	Conglomeates	16.81	13	-22.67
Fidson Healthcare	Healthcare	1.28	0.99	-22.66
AG Leventis	Consumer Goods	0.96	0.75	-21.87
Africa Prudential	Other Finanacial	3.05	2.41	-20.98
Ashaka Cement	Industrial Goods	12.02	9.5	-20.97
Honey well Flour	Consumer Goods	1.3	1.05	-19.23
Vitafoam	Consumer Goods	2.4	1.95	-18.75
Cadbury	Consumer Goods	10.29	8.37	-18.66

The upside for the period under review was led by Beta Glass, which chalked 46.04% on account of better numbers posted and dividend recommendation for its shareholders, followed by Airline Services with 42.40%; UBA, 28.22%; and Okomu Oil, 24.47%.

The best performing stocks in the quarter are service providers which were dominated by financial services stocks, followed by agribusiness.

See others on the table below:

Best Performing Stocks in Q1
Securities	Sector	Open	Close	% Change
BetaGlass	Industrial	30.32	44.28	46.04
Airservice	Service	2.50	3.56	42.40
UBA	Financial	4.50	5.77	28.22
Okomu Oil	Agribusiness	40.17	50.00	24.47
Stanbic IBTC	Financial	15.00	17.78	18.53
Presco	Agribusiness	40.10	47.00	17.21
Unity Bank	Financial	0.53	0.64	16.36
Continental Reinsur	Financial	0.99	1.11	12.12
FCMB	Financial	1.10	1.21	10.00
NPF Micro Finance	Financial	1.10	1.21	10.00
Pharmdeko	Healthcare	1.78	1.95	9.55
Eterna	Oil/Gas	3.10	3.39	9.35
Julius Berger	Consturction	38.58	41.95	8.74
Mobil Oil	Oil/Gas	279.00	300.00	7.53
Access Bank	Financial	5.87	6.28	6.98

Where to invest and expectation In Q2

The market and economic outlook for second quarter are dicey and unstable due to an oscillating crude oil price in the internationally markets as uncertainty over whether an OPEC-led supply cut is big enough to rebalance the market, with increasing global economic  uncertainty from the fiscal and monetary authorities.

One must not however overlook the expected positive impact of the relative peace and security returns to the nation’s Niger Delta region and stability in oil output with upside implications for the nation’s revenue, economic health and wellbeing.

In the quarter, more positive economic data are expected, especially inflation figure for March, Purchasing Managers Index (PMI) and GDP to really confirm that the economy is on the path of recovery.

As the earnings season for 2016 full year reporting officially comes to end, company fundamentals are assessable as they are in the public domain, besides the situation of the market and other economic fundamentals to help investors make investment decisions about where and when to be in and out of particular stocks. This is especially true with the first quarter earnings reports expected in the market this April and beyond.

Traders and  investors who understand the operations of the stock market should take this opportunity to position in some sectors for medium to long term gains, especially the banking, Insurance, Agribusiness and Service sectors.

This recent published full year financials of many listed companies will help you to   project whether the company is likely to post a better Q1 or not, after you have studied the quarterly earnings trend of any company before buying into the stock. Earnings as we have always noted in INVESTDATA, is a function of equity price movements. This is in addition to information emanating from these companies, which are expected to attract more market players, dividend investors and possibly foreign bargain hunters to the market. In the Nigerian stock market, the month of April is the peak period of quarterly earnings season which suggests that traders should be in the market before the quarterly numbers start rolling in.   

What to expect in April and May

• More quarterly and few full year earnings would be released. Earnings from blue-chip companies may strengthen market fundamentals, if positive.
• The oscillating trend of equity prices as a result of profit taking and some disappointing some results. Also the source of funds brought to the market may cause fluctuations, giving that both local and foreign institutional investors trade in the market. The up and down movement will continue depending on a combination of the economic and company fundamentals.
• Investors are expected to reshuffle their portfolio to invest in some equities with strong fundamental and prospects of growing their earnings going forward.
• A more vibrant market as a result of market players positioning for second quarter, even as we expect liquidity to improve.
• Market outlook for these months are dicey but invest wisely, using dates, bids, offers and volume when taking decisions.
• 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 emanating from companies guide you decision and time to stay in that position.