INVESTORS INTERPRET COMPANY FINANCIALS, ECONOMIC DATA AHEAD OF 2018 OUTLOOK, POSITIONING

MARKET ROUNDUP FOR OCTOBER, 2017

The last quarter of 2017 started on a positive note on Wednesday, reversing two consecutive months of bear transition as it closed higher on bullish sentiment helped by the torrents of impressive corporate earnings reports released over the past 15 days to coincide with the regulatory deadline for submission in line with the post-listing requirement of the Nigerian Stock Exchange (NSE).

Despite the relatively weak liquidity in the market and continued profit taking that has dominated the market in recent years, fiscal policies and the needed stimulus to hasten economic recovery are not clear enough to give direction or impact the citizenry by strengthening their purchasing power going by the implementation of 2017 budget has not reflected on the economy much to complement the monetary policies. Of particular importance is that the huge amount budgeted for infrastructural development to drive and strengthen economic fundamentals to boost national output are still very sluggish. 

For emphasis, there is no good road network for movement of goods and services to the market, which has made cost of goods prohibitive, in addition to high cost of production that almost crippled the manufacturing sector, until the Central Bank of Nigeria (CBN) started intervening in the foreign exchange segment of the inter-bank market. This has brought great relief to operators in the nation’s manufacturing sector, a situation that is reflected in the positive numbers posted so far. This means that other complementary infrastructures like power, road, water and low interest rate will boost the sector, leading to provision of more jobs and enhanced living condition for the people.

Despite the relatively weak market response to the positive numbers as at released dates which is an evidence of low liquidity as mentioned earlier, the Q3 numbers of the companies have revealed the possibility of prices remaining northward, just as investors would be assured of juicier reward in the form of dividend when the full-year score-cards begin to flow into the market in the early days of 2018.

Discerning investors and traders should take advantage of the year-end season and cycle to grow their income ahead of major earnings season in first quarter of 2018.

In the 21 trading sessions of October, the market was up in 12 and down in nine, wiping out two months of loss, following which year-to-date gain stood at 36.49%, attributable to factors mentioned above, making the Nigerian stock market one of the best performing of the MSCI Frontier markets, in Africa and across the globe. The improvement in numbers presented by the listed companies, as well as their fundamentals and recovery of the economy made Nigerian equities attractive; many remain undervalued, offering a high margin of safety.  

Meanwhile, the composite NSE All-Share Index in the month gained a total of 1,240.31 basis points, closing at 36,680.29 after touching a high of 37,041.52 and low of 35,155.08 within the period, compared to the 35.439.98 at which it opened. This represented a 3.50% growth over the period on a strong buy-market position that impacted on stock prices to rebound from the two months pullback.

The buying volume of total transactions was 81%, and selling position, 19% to usher another bull-run in the last quarter of the year, while volume index for the period was 0.93.  Market capitalisation gained N478.01bn to close higher at N12.69tr, from N12.22tr, representing a 3.91% appreciation in value. The market  rebounded on impressive numbers as foreign investors maintain their position in the market in what may seem many of them not wanting to be caught napping when the market begins to react more positively to the recovery and macro-economic data being released. 

Traded volume for the month was up 43.61% to 5.73bn shares, as against 3.99bn units recorded in the preceding month.

The ASI’s year-to-date gain stood at 36.50%, just as market capitalisation for the same period adjusted up to N3.45tr, representing a 37.29% gain YTD from the opening value. 

Market breadth for the month was positive with the advancers outnumbering decliners in the ratio of 49:28 to halt the two months down market that was as a result of profit taking.

Premium And Banking Take Lead

The sectoral performance chart below shows that NSE Premium and Banking indices drove the market the most in the month under review. While, the Premium index gained 5.99%, driven by price movement in Dangote cement, Zenith Bank and FBNH, the banking index notched 5.33%, outperforming the composite NSE All-Share Index during the period. It was followed by the NSE Pension index which rose by 4.70% to reflect the performance of dividend paying stocks on the exchange, while the NSE 50 and 30 indices climbed 3.69% and 3.36% up respectively, revealing investors’ interest in blue-chip stocks, amidst the low Price-To-Earnings attraction.

Other sectors that closed up during the month were: The NSE Lotus, NSE Industrial Goods, NSE Main Board, NSE Oil/Gas and the NSE Asem.

Sectoral indexes that closed in the red included NSE Insurance and NSE Consumer Goods, which shedding 0.49% and 0.33% respectively, creating opportunities for investors and traders to position owing to their improved earnings that continue to boost confidence in the sectors.   

Best And Worst Performing

The month’s best performing stocks was Dangote Flour, which rallied on the strength of strong numbers and expected cyclical rally as the year winds down. It gained 49.37% of its opening price and was followed by its sister company- National Salt, which appreciated by 34.78%; ahead of International Breweries’ 32.41% notch, while conglomerates- UACN climbed 25.27%, despite its mixed numbers went; and Linkage Assurance, 24.64%; among others.

Consumer Goods stocks and other low/medium caps on the top gainers table for the month included: Caverton with 21.15%; Learn Africa 18.92%, Flourmills, 18.64%, Vitafoam, 18.33% and CCNN, 16.03%; among others.

Best Performing Stocks in October
Securities	Sector	Open	Close	% Change
Dangote Flour	Consumer Goods	6.38	9.53	49.37
National Salt	Consumer Goods	12.02	16.20	34.78
International Breweries	Consumer Goods	37.00	48.99	32..41
UACN	Conglomerates	15.00	18.79	25.27
Linkage Assurance	Insurance	0.69	0.86	24.64
Caverton	Services	1.04	1.26	21.15
Learn Africa	Services	0.74	0.88	18.92
Flourmills	Consumer Goods	26.55	31.50	18.64
Vitafoam	Consumer  Goods	2.51	2.97	1833
CCNN	Industrial Goods	8.36	9.70	16.03
GSK	Healthcare	22..00	25.20	14.55
Fidelity Bank	Financial	1.34	1.52	13.43
Fidson Healthcare	Healthcare	3.52	3.99	13.35
Presco	Agribusiness	59.00	66.30	12.71
NPF Micro Finance	Financial	1.11	1.25	12.61
Custodia & Allied Ins	Other Financial	3.50	4.00	11.11

Source; Investdata Research

Worst performing stocks for the period was led by Law Union & Rock Insurance, which lost 23.66% of its opening price during month, amidst profit taking and mixed performance in the recent numbers released; Forte Oil lost 19.84% also as a result of its mixed performance; just as Jaiz Bank declined by 17.14%. University press closed 16.34% lower for the month; just as Cutix dropped 16.00% on the back of profit taking after price adjustment for dividend proposed.

Worst Performing Stocks in October
Securities	Sector	Open	Close	% Change
Law Union	Insurance	0.93	0.71	-23.66
Forte Oil	Oil/Gas	49.90	40.00	-19..84
Jaiz Bank	Financial	0.70	0..58	-17.14
University Press	Services	2.57	2.15	-16.34
Cutix	Industrial Goods	2.50	2.10	-16.00
Unity Bank	Financial	0.60	0.51	-15..00
Mrs Oil	Oil/Gas	31.98	27.46	-14.13
PZ	Consumer Goods	26.00	23.00	-11.54
Continental Reins	Insurance	1.50	1.33	-11.33
Nigerian Breweries	Consumer Goods	165.00	150.00	-9.09

Source: Investdata Research

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