JUNE MARKET: INVESTORS UPBEAT, BUT CAUTIOUS AMIDST BUDGET SIGNING, ECONOMIC DATA, MARCH REPORTS

MARKET ROUNDUP FOR MAY 2017

The month of May 2017 again defiled the popular saying that “sell in May and return in October,” which has in the past held true repeatedly as the Nigerian Stock Exchange (NSE) closed the month higher. This time around, the nation’s equity market galloped in May which ended on Wednesday with the NSE among the globe and Africa’s best performing markets.

The bull ascendancy was obvious in 21 trading sessions of the month when the market was up for 18 trading sessions and down in just three trading days to continue the third month of bull transition that turned the market from a loss position to a year-to-date gain of 9.76% attributed to several factors. These include the unprecedented number of listed companies that paid dividend for 2016, despite the economy being in recession with weak economic fundamentals that beat the expectations of the investing public.

Added to these was that corporate earnings for Q1 surpassed expectations,confirming data from the National Bureau of Statistics (NBS) and other data indicating that the economy is indeed recovering from recession, such as the inflation rate which declined in February, the first time in 15 months. That was also the month the Central Bank of Nigeria (CBN) reviewed its foreign exchange policy, leading to the ongoing intensive intervention under various sub-heads, including that meant to enable Small and Medium scale Enterprises (SME) import critical raw materials and machinery for productive activities. This, added to the provision for funding of invisibles such as Basic Travel Allowance/Personal Travel Allowance and medicals, as well as the usual wholesale auctions have enhanced forex liquidity, thereby bringing relative stability in exchange rate, leading to an appreciation in the value of the Naira against other global currencies.

Added to these is the relative peace in the Niger Delta that had supported the increase in daily crude oil production output expected to impact on the Federal Government’s revenue needed to fund the 2017 budget. Despite the fluctuation in the international price of crude, the good thing is that remains $7 to $8 above the $45 benchmark set in the 2017 budget now awaiting Presidential assent for implementation that kick start implementation of the government’s Economic Recovery Growth Plan (ERGP). If judiciously executed, it is expected that the plan would accelerate the recovery, after the economy has struggled for almost six months without 2017 budget.

Meanwhile, the composite index NSEASI for the month of May gained 3,739.80 points to close at 29,498.31 from an opening figure of 25,758.51, representing a 14.52% growth over the period on a strong accumulation move that impacted on stock prices to hit a new 52-week high within the period under review.

The buying volume of total transactions for the month was 94%, while selling position was 6% to continue the two previous month’s up market as volume index for the period was 1.30.  Market capitalisation for the month gained N1.28trto close higher at N10.2tr, from an opening value of N8.91tr, representing 14.52% appreciation in value, with market having a bullish sentiment for stocks as export and import exchange window stabilized with improving liquidity as the CBN matched the market’s supply side.

The month’s traded volume was up significantly by 127.81% to 8.93bn shares from 3.92bn in the month of April.

The All Share index’s year-to-date gain stood at 9.76%, just as market capitalisation for the same period adjusted up to N950.70 billion, representing 10.21% gain YTD from the opening value. 

Market breadth for the month was strong and positive with widen number of advancers that outnumbered the decliners in the ratio of 77:15 to continue the bull-run.

The sectoral performance chart below shows that NSE Banking drove the market the most in the period under review. It gained 26.02%, which was more significant than that recorded by the benchmark NSE All Share Index; followed by the NSE Pension which rose by 20.89% to reflect the power of  dividend paying stocks. This was followed by the NSE Premium index, which moved 19.63% up, to reveal investors interest in value stocks with strong upside potentials, amidst their low Price-To-Earnings attraction in the sector. Other sectors that closed up during the month were: NSE Consumer goods, NSE Main Board, NSE 30 Index, NSE Insurance and NSE Asem, while NSE Oil/Gas was the only sector in red by 2.97%.

The month’s best performing stocks were Fidson Healthcare, which rallied on the strength of market hearsay of acquisition of another pharmaceutical company, a situation expected to boost market share and bottom line, going forward. It closed the month better by a significant 107.27% of its opening price; followed by another healthcare company May & Baker, which appreciated by 75.29%; while FBN Holdings chalked all of 67.10%; and Oando, 46.19%.

Low, medium and high cap stocks among the top gainers for the month included: AXA Mansard Insurance with 43.31 % gain; UACN Property, 36.67 %; and Transcorp, 36.36%; among others.

Best Performing Stocks in May
Securities	Sector	Open	Close	% Change
Fidson Healthcare	Healthcare	1.10	2.28	107.27
May & Baker	Healthcare	0.85	1.49	75.29
FBNH	Financial Sector	3.17	5.30	67.19
Oando	Oil/Gas	5.78	8.45	46.19
AXA Mansard	Insurance	1.57	2.25	43.31
ETI	Financial	7.71	10.60	37.48
Uacn Property	Real Estate/Construct	1.80	2.46	36.67
Transcorp	Conglomerates	0.88	1.20	36.36
Law Union Insurance	Insurance	0.76	0.98	28.95
UBA	Financial	5.82	7.50	28.87
GTBank	Financial	26.63	34.01	27.71
Zenith Bank	Financial	14.90	18.95	27.18
Fidelity Bank	Financial	0.82	1.04	26.83
Vitafoam	Consumer Goods	2.00	2.53	26.50
PZ	Consumer Goods	14.92	18.70	25.34
Eterna	Oil/Gas	3.03	3.73	23.10
CCNN	Industrial Goods	4.44	5.46	22.97
Diamond Bank	Financial	0.79	0.97	22.78
Livestock Feeds	Agribusiness	0.74	0.90	21.62
NB	Consumer Goods	123.01	149.50	21.53

The worst performing stocks’ table  was led by Jaiz Bank, which lost 17.30%, linked substantially to its nature of banking that emphasizes profit sharing, rather than interest on loans charged by commercial banks. There was also the factor of it sun impressive Q1 2017 numbers released recently; Mobil Oil lost 4.26% during the month under review; the share price of Saplat Petroleum Development Company declined by 14.15%; Learn Africa, 9.76%; and Lafarge Africa,5.73% on the back of profit taking.

Worst Performing Stocks in May  2017
Securities	Sector	Open	Close	% Change
Jaiz Bank	Financial	1.15	0.95	17.39
Mobil	Oil/Gas	332.00	284.65	14.26
Seplat	Oil/Gas	410.00	351.00	14.15
Learn Africa	Insurance	0.82	0.74	9.76
Lafarge Africa	Services	50.02	48.00	5.73
Unity Bank	Financial Service	0.58	1.15	3.45
NPF Micro finance	Financial service	1.32	1.28	3.03
CAP	Industrial Goods	33.00	32.15	2.86
Champion Bewarey	Consumer Goods	2.35	2.29	2.55
TransExpress	Services	0.83	0.81	2.41
Aiico	Insurance	0.53	0.52	1.89
Stanbic IBTC	Financial	26.25	26.00	0.95
7UP	Consumer Goods	95.00	94.77	0.24

Where To Invest And Expectations For June, July

The outlook for the global economic and market remains unstableas political uncertainties take centre stage once again. Despite the positive data coming out of China overnight, where factory activities grew at a steady pace, investors in Europe are likely to focus on politics. Britain’s Ms. Theresa May could fall short of winning an overall majority at next week's general election. She decided to call a snap election to strengthen her parliamentary position and have more power in Brexit negotiations with the European Union, but her lead over the Labour Party has significantly narrowed over the past few days. Meanwhile, France and Germany want to agree on a new common corporation tax system before elections for the French National Assembly next month, the German Finance Minister, Wolfgang Schaeuble, said on Tuesday, according to Reuters.

Concerns over North Korea’s continuous testing of missiles at a time of political crisis since the FBI chief was sacked by President Donald Trump, even as oil prices continue to fluctuate in the international markets. All these factors have kept the level of global uncertainty high. There are also the unstable fiscal and monetary policies around the world.

Back home, the seeming economic recovery mode will continue in the new month as we expect more of positive economic data and the eventually signing of 2017 budget into law, thereby triggering the implementation of ERGP that would hopefully complement the CBN’s effort at boosting productivity that will create employment and sustain the already noted 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 June, we expect inflation figure for May to be released by the NBS to drop further; just as Purchasing Managers Index (PMI) is expected to improve again in order to support the seeming recovery in Nigeria’s manufacturing sector.

The March year-end accounts are expected to strengthen market fundamentals if the numbers beat expectations and are in line with Q1 earnings reports to further confirm improvements in the business environment. The low valuation in the market despite the recent rally in many stocks still remain undervalued on the strength of the intrinsic value that should guide  the investing public to know where to look while seeking to invest profitably for the rest of the year.

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 pullback  to position in some sectors for short, medium and  long term gains, especially  in the banking, Insurance, agribusiness,  service sector, oil and gas  after carefully study of the recent price pattern and 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. This 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 profit taking.
• Market outlook for June remain mixed as the month has been in decline for two time in last three years and was up once.  But with the positive sentiment and strong momentum as the market expect, the economic recovery to be strengthened with the implementation of 2017 budget immediate is sign into law. As  CBN’s has so far  sustained its intervention in the FX market that had boosted liquidity and confidence in the economy and market which is expected to impacted business activity ahead of second half of the year.   
• Low price to earnings in market may trigger more 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.
• Being the last month of the second quarter of the year, activities are likely to look up as investors reposition for Q2 earnings season and second half of the year.
• In the coming Investdata comprehensive stock market trading and investing workshop where short trading strategies and how to identify quality companies to invest before the market look toward it. 

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