SEPTEMBER TRADING REVIEW AND IDENTIFYING SECTORS TO INVEST IN OCTOBER

Global economic growth outlook remains mixed and unpredictable as geopolitical risks continue to rise and fall with North Korea’s continuing missiles test despite UN imposed sanction. This has remained a threat to investments and business, irrespective of the positive economic data. The healthy growth in the second quarter, with advanced economies benefited from compassionate monetary conditions and tightening labour markets, as Inflation accelerated in the U.S. amidst hurricane related disruptions which caused gas prices to spike, while inflation in the UK came in above market expectations.
The UK’s annual GDP growth revised down in Q2 to lowest rate since 2013, while China’s business activity was hampered by tightening credit, with the Eurozone’s economic activities looking up to reflect the expansionary economy.

The recent strengthening of the US Dollar against other global currencies with tax cut plan by the Donald Trump administration may boost prices of equities and threaten commodity prices of oil in the international market is currently trading at $59.92per 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Another factor is the unstable fiscal and monetary policies around the world, with stimulus gradually being withdrawn; a situation that had triggered inflation in US, UK and Germany, while other parts of the Europe zone and Japan remained relatively unchanged.
Back home, the recent positive macro-economic indices released by the National Bureau of Statistics (NBS) and Central Bank Nigeria (CBN) are indicators that support economic recovery, despite the numbers being pale green, an indications of the need for more tangible efforts to drive substantial growth in the system. Economic indicators that emerged from the September included the Q2 GDP growth of 0.55%, the 16.01% inflation rate for August from 16.05% in July, added to the fact that the nation’s foreign reserves recently hit a 13-month high of $33bn from $29.13bn, which according to the Federal Government as part of the 57 achievements of the Muhammadu Buhari-led administration to mark Nigeria’s 57th Independence Anniversary, “has surpassed the ERGP’s (Economic Growth and Recovery Plan) target of $30.56bn despite global low oil prices and production challenges. Nigeria’s external reserve is poised to rise even higher as oil price traded at $59.92 on Friday at the international market.

Purchasing Managers Index (PMI) for the month of September was up to 55.3 point from 53.6 point recorded in August that confirms the seeming economic recovery in Nigeria as manufacturing sector continuing to look up, reflecting the impact of the CBN’s intervention policy in the FX market on the real sector and the economy at large. Between April 24 and July, the CBN’s new Investors and Exporters Window (NAFEX) powered a turnaround in investor sentiments, trading around $3.8bn, about a third of which was supplied by the CBN. This will be complemented by the fact that Nigeria’s Crude oil production level improved appreciably to 2.05 million barrels per day in June 2017
The expected Q3 earnings season in the month of October is likely to impact much on the market, depending however on the strength of numbers especially if they beat market estimates, while repositioning of portfolios continue ahead of earnings season.
Also, being the first month of the last quarter of the year, expect the market to keep oscillating in October; just as fiscal policy direction (from the government) would further strengthen market fundamentals and the economic recovery.

The recent wave of correction supports low valuation in the market, despite the mixed sentiments. Many stocks remain undervalued on the strength of the intrinsic value that should guide the investing public as they seek to close the year in the green in terms of the portfolio’s worth.
Traders and investors who understand the dynamics of the market and the importance of combining fundamental and technical analysis in making investment decisions in stocks 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 and beyond include: the fast moving consumer goods, insurance, banking, and agribusiness, building material, oil and gas. This must however be after a careful study of the recent price pattern and fundamental data available in the market ahead of the October Q3 earnings season. 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 October and November
So far, history and research have presented the month of October to be a volatile one for the stock market. The seasonal changes and expectation should guide market players investing strategies to adopt as we journey into the new month. 

They are:
• Release of quarterly earnings in October, being the end of the statutory 30-day period for submission of quarterly scorecards that end in September. The expected numbers are likely to strengthen market fundamentals if positive, due to sectoral influence given that before now the companies had posted better than expected numbers. Inflation figure for September also expected.

• The oscillating trend of equity prices as a result of repositioning of portfolios along the line of positive numbers and profit taking in the October earnings season.

• Market outlook for the new month remains mixed as more quarterly and less full year earnings reports 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.

• The relative low Price-to-Earnings ratio in the market especially in the banking sector may further attract demand for stocks, but you must invest wisely, using bids, offers and volume when taking decisions as a trader.

• Factors used in identifying quality companies are consistent earnings growth, a profit margin that is above 10 per cent, low debt, improved cash flow and good dividend payout ratio. This suggests that planning one’s financial freedom through equity investment is very possible if you are buying the right stocks for profit.

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, which our buy and sell signal provide for subscribers. To join text YES to 08028164085.

Meanwhile, let corporate earnings guide your decision and time to stay in that position.
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