MARKET ROUNDUP FOR APRIL 2017

NSE INDICATORS END APRIL GREEN, AS INVESTORS SEEK POSITIVE DATA GOING FORWARD

After starting off with two losses and gains in the first four trading days of April, the market recovery mode that started in March was sustained,as the indices of the Nigerian Stock Exchange (NSE) finished the period under review on a positive note. 

This was attributed to the earnings reporting season that supported the trend, as many shareholders smiled to and are still smiling to their banks, despite the mixed sentiments that followed 2016 financials due to the impact of weak macroeconomic business environment that weighed down many companies performance as revealed in the numbers they posted. 

But as if to assure investors of good times ahead, the first quarter corporate earnings reports released in the final days of the month of April show improvement over the corresponding period in 2016 to signal recovery. Analysts agreed that if the companies are able to sustain the juicy Q1 numbers, prices can only close northward, just as investors would be assured of juicier reward in the form of dividend when the score-cards begin to flow into the market in the early days of 2018. 

The weak market response to the positive numbers as at released dates so far, is an evident of low liquidity in the market and the economy at a time when the 2017 budget faced with so much uncertainty at this time of the year. It is one month to mid-year and the National Assembly is yet to approve and subsequently present a clean copy of the year’s Appropriation Bill for ascent by President Muhammadu Buhari, thereby slowing down the whole system and implementation of the administration’s much talked about Economic Recovery and Growth Plan (ERGP). 

In addition to this, the government has continued to over crowd the financial market with high interest yielding instruments, thereby boxing the private sector to tight corner, especially with a high interest rate market where they are to source funds for productive activities.

Moreso, the few rays of hope, including the positive economic data, improving corporate earnings and the Central Bank of Nigeria (CBN) continued intervention in the forex market to meet the supply side with over $1bnalready, are yet to boost confidence as liquidity in the system remains low and commodities prices remain prohibitive. 

It must however be noted that market players have expressed high hope that these factors will impact the economy positively very soon, even as government and its team should continue to do the needful to ensure that the economy emerges stronger from this lingering recession. Government, they say, can do this and more to sustain growth by making new polices and reviewing the existing policies for adjustment. The continue rise in the nation’s external reserve to $30.80bn, despite the CBN’s sustained intervention in the forex market in its bid to stabilize the Naira against major global currencies in the period under review is a plus for the market and the economy despite the unstable price of oil that is a major source of government revenue. Improvement in the Naira’s value would become more pronounced when autonomous sources of the green back resume meaningful supply to help ensure improved liquidity in the system.

Meanwhile, the market in the last 18 trading sessions of the month has been oscillating to close higher after recording 9 trading days of down market and the same for up market for the period.  The composite index NSEASI for the month of April gained 242.17 points to close at 25,758.51 from an opening figure of 25,516.34, representing 0.95% growth over the period. 

The buying volume of total transactions for the month was 82%, while selling position was 18% to continue the previous month’s up market as volume index for the period was 0.59. Market capitalisation for the month gained N83.85 billion to close higher at N8.91trillion, from an opening value of N8.83 trillion, representing 0.91% appreciation in value, with the market having a bullish sentiment in expectations of Q1 scorecards that eventually beat investors and analyst’s estimates. The month’s traded volume was down by 32.30% to 3.92 billion shares from 5.79 billion in the previous month of March. 

The benchmark index’s year-to-date negative position stood at 4.15%, just as market capitalisation for the same period adjusted up to N334.03bn, representing 4.09% loss YTD from the opening value. 

Market breadth for the month was positive as the number of advancers outpaced the decliners in the ratio of 59:30 to continue the bull transition that reversed the first two months of down market of the year. During the period, more than 70% of listed companies with December year-end released their first quarter earnings reports to the market. The numbers were nonetheless mixed, but they surpassed market expectations especially the operators in the banking sector, which helped the service industry, which include the financial service providers and others to emerge on the best performing stocks chart for April.  

The sectoral performance chart below shows that Industrial Goods sector propelled the market the most in the period under review. It gained 6.96%, which was more significant than that recorded by the benchmark NSEAll Share Index; followed by the NSE Pension which rose by 5.93% to reflect the power of blue-chip dividend paying stocks. This was followed by the NSE Banking index, which moved3.74% up, a situation that was attributed to the impressive numbers churned out by majority of the bank stocks, amidst their low Price-To-Earnings attraction in the sector. Other sectors that closed up during the month were: NSE Oil/Gas, NSE Main Board, NSE 30 Index, NSE Insurance and NSE Asem. On the downside, the NSE Premium led by 2.12%; followed by NSE Consumer Goods, 1.86%; and the NSE Lotus 2, 1.30%.

The month’s best performing stocks were Stanbic IBTC, which posted impressive 2016 full year and first quarter 2017 earnings reports despite low dividend payout during the period. It closed the month better by a significant 48.98% of its opening price; followed by Airservice, which appreciated by 40.32%; while C&I Leasing chalked all of 36.00%; and Lafarge Africa, 31.07%.

Low cap stocks among the top gainers for the month included: Learn Africa, 20.59%; Transcorp, 20.55%; and Honeywell flour, 19.05%; among others.

Best Performing Stocks in April
Securities	Sector	Open	Close	% Change
Stanbic IBTC	Financial Service	17.62	26.25	48.98
Air Service	Service	3.10	4.35	40.32
C/I Leasing	Service	0.50	0.68	36.00
Lafarge Africa	Industrial Goods	38.85	50.92	31.07
National Allied Indus	Consumer Goods	6.90	8.49	23.04
Cadbury	Consumer Goods	7.60	9.30	22.37
Learn Africa	Service	0.68	0.82	20.59
Transcorp	Conglomerates	0.73	0.88	20.55
Honeywell Flour	Consumer Goods	0.98	1.17	19.39
Nahco	Service	2.10	2.50	19.05
CAP	Industrial Goods	28.20	33.00	17.02
Africa Prudential	Other Financial	2.31	2.69	16.45
Dangote Flour	Consumer Goods	3.66	4.21	15.03
7up	Consumer Goods	83.00	95.00	14.46
Livestock Feeds	Agribusiness	0.65	0.74	13.85
Oando	Oil/Gas	5.08	5.78	13.85
International Brew	Consumer Goods	15.14	17.84	13.27
Mobil	Oil/Gas	297.25	332.00	11.69
UACN	Conglomerates	12.99	14.47	11.39
Ashaka Cement	Industrial Goods	9.50	10.44	9.89

The decliners were led by FCMB, which lost 23.20%, linked substantially to its lean dividend payout and unimpressive Q1 2017 numbers that were released within the period; May& Baker lost 15%; Trans nationwide Express declined by 9.09%; Custodian Allied Insurance 10.12%; and ETI, 9.82% on the back of weak 2016 full-year and 2017 first quarter numbers.

Worst Performing Stocks in April  2017
Securities	Sector	Open	Close	% Change
FCMB	Financial	1.25	0.96	23.20
May & Baker	Healthcare	1.00	0.85	15.10
Trans Nationwide Exp	Services	0.95	0.83	12.63
Custodian Allied Ins	Insurance	3.36	3.02	10.12
ETI	Financial Service	8.55	7.71	9.82
Jaiz Bank	Financial Service	1.27	1.15	9.45
Diamond Bank	Financial service	0.87	0.79	9.21
Aiico Insurance	Financial service	0.58	0.53	8.62
Berger Paints	Industrial	6.38	5.88	7.84
Eterna	Oil/Gas	3.23	3.03	6.19
Unilever	Consumer Goods	33.90	31.81	6.17
CCNN	Industrial	4.7	4.44	5.53
Nigerian Breweries	Consumer Goods	130.00	123.01	5.38

Where To Invest And Expectations For May, June

The global economic and market outlook remain unstable due to concerns over North Korea, at a time Japan and United States are holding military drills off that country’s coast. This is in addition to U.S’ position in global trade agreements that is now given conflicting signals, as oil prices continue to fluctuate in the international markets. All these factors have kept the level of uncertainty high. There are also the reduce political risk from France’s election, United Kingdom election still ahead, coupled with Brexit move and unstable fiscal and monetary policy around the world.

Back home, the seeming economic recovery will continue in the new month as we expect more of encouraging economic data and the eventual passage of the much awaited 2017 budget into law, thereby triggering the faithful implementation of ERGP that would hopefully complement the CBN’s effort at boosting productivity that will create employment and sustain recovery. Reasons for this are not far-fetched, given the relative peace and security that have since returned to the nation’s troubled Niger Delta region and stability in oil output, all of which would impact the nation’s revenue positively in the coming months. 

In May, we expect inflation figure for April to be released by the National Bureau of Statistics (NBS) to drop further; just as Purchasing Managers Index (PMI) improves slightly to reflect the seeming recovery in Nigeria’s manufacturing sector and the GDP that would really confirm that the economy is on the path of recovery. 

As the Q1 earnings reporting season officially comes to close with the month, company fundamentals have come out relatively stronger, leading to more positive numbers to kick start the 2017 financial year and provide a guide for the investing public to know where to look while seeking to build their tent.  

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 to position in some sectors for medium to long term gains, especially the banking, Insurance, agribusiness and service sectors after carefully study of the recent numbers made available to the market.

What to expect in May and June

• Release of few quarterly and full year earnings. Earnings from blue-chip companies may strengthen market fundamentals, if positive.
• The oscillating trend of equity prices as a result of re-positioning of portfolio along the line of positive numbers and profit taking.
• Market outlook for May is always dicey, in line with popular saying that traders always “sell in May and come back in October,”which necessarily depresses the market in May. In the Nigerian market, however, this theory has been defiled three time over the last five year when the market was up, contrary to the expected down market for the period. But with the better Q1 numbers than expected, 2017 budget likely to be approved by the national assemble this month, the CBN’s readiness to sustain it intervention in the FX market and the reserve still looking robust, there is a likelihood of improvement in liquidity, business activity ahead of second half of the year. 
• Low valuation in the market may trigger high 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 the companies guide you decision and time to stay in that position.
• March year end companies full year earnings reports will start hitting the market in May till June.