WHERE TO INVEST AND EXPECTATIONS FOR SEPTEMBER 2017

The global economic recovery is at the moment under threat by the continued tension from North Korea missiles display that may trigger war of any sort if not checked immediately, added to political risks and unfriendly international policies emanating from some developed countries, which are currently slowing growth. There is also the Hurricane Harvey currently ravaging the U.S state of Texas that had affected refineries in the country, following which there is a spike in gasoline price across the country, just as prices of other commodities are looking up at the international market, despite the continued oscillation in oil price that is currently trading at $52.07per barrel.

Another factor is the unstable fiscal and monetary policies around the world, with stimulus gradually being withdrawn; a situation that had triggered inflation in US, UK and Germany, while other parts of the Europe zone and Japan remained relatively unchanged.

Global economy growth outlook remains unpredictable, despite the positive economic data and impressive corporate earnings as political and economic uncertainties continue to threaten businesses and investments, made worse by the body language and utterances of world leaders.

Back home, there are factors such as the continued decline in inflation rate to 16.05%, growth in foreign reserves and positive macro-economic indices that had supported the recovery so far on the strength of CBN intervention in the FX market that strengthened the Naira relatively and supported stable exchange rate for this six months of recovery. However, the non-implementation of the 2017 budget is beginning to threaten confidence among the investing public in the whole system, given that the CBN’s efforts alone cannot sustain growth in productivity to create and grow employment. Regardless of the fluctuating price of crude oil, 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 impacted the nation’s revenue positively, the secrecy in the budgeting process has not helped till date after four months since the Vice President, then Acting President Yemi Osinbajo assented to the 2017 Appropriation Bill. 

In September, we expect Nigeria’s inflation rate to continue dropping as price will relatively remain flat until October when price will start looking up again for the end of the year/festive season.

PMI for the month of August was down but the expectation for  improvement in the new month is high if the government does the needful  to support the seeming recovery in Nigeria’s manufacturing sector as Q2 numbers from the sector surpassed market expectation to confirm the positive impact of CBN intervention policy in the FX market on the sector.

The June year-end accounts that are expected in the month are very few so it would not impact much on the market this month but we expect investors and analysts to interpret the recent scorecards from first-tier banking stocks and other sectors to reposition their portfolios ahead of the Q3 earnings season in October. Also, this being the last month in Q3,we expect the market to keep oscillating in the new month, just as economic policy direction from the government would further strengthen market fundamentals and the economic recovery.

The recent pullback supported the low valuation in the market despite the latest rally as many stocks still remain undervalued on the strength of the intrinsic value that should guide the investing public as they seek to invest profitably for the rest of the year.

Traders and investors who understand the dynamics of the market and the importance of combining fundamental 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. Sectors that could be looked at for juicy returns this month include: the fast moving consumer goods, banking, agribusiness, building material, oil and gas after a careful study of the recent price pattern and fundamental data available in the market ahead of Q3 earnings season in October. This is a very important season in stock market cycle in taking final investment decisions for the year as numbers expected at that period give insight into what should be expected at the end of December financial year end.

What to expect in September and October

• Release of June full year earnings in September, being the end of the statutory 90-day period for submission of audited results. The expected Guinness Nigerian earnings may strengthen market fundamentals if positive, dueto sectoral influence given that before now the company had posted weak numbers.
• The oscillating trend of equity prices as a result of repositioning of portfolio along the line of positive numbers and profit taking ahead of October earnings season.
• Market outlook for the new month remains mixed as less quarterly and full year are expected.  But with the positive sentiment and strong momentum as the market expects the economy’s recovery to be strengthened if the government implements the  2017 budget faithfully and the CBN sustains its intervention in the FX market that had boosted liquidity and confidence in the economy and market and impacted business activity as revealed by recent corporate earnings.
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