MARKET ROUNDUP FOR NOVEMBER 2017

NIGERIA’S INDEX POISED TO FINISH 2017 STRONG, AMIDST SEASONAL CHANGES, OIL PRICE IMPACT

A healthy combination of the continued impact of the third quarter earnings surprisesand  positive macro-economic indices which confirmed the nation’simproved recovery continued to impact basic indices of the Nigerian Stock Exchange (NSE) as they confirmed that the economy remainson the path of growth, despite being slower than expected. It was however strong enough to influence equity prices positively such that the market closed the month of November higher, building on the gains recordedin the preceding month and reflecting the high demand for stocks. Growth in the period under review was helped by the rising foreign investment inflows in spite ofthe nation’s downgrade by Moody’s and decision of the MSCI Frontier Market Index within the period under consideration.

The manufacturing activities in the current  year continues to improve as a result of gradual increase in the purchasing power of Nigerians and increasing productivity  that is reflected in the monthly Purchasing Managers’ Index for the last eight months, according to data from the Central Bank of Nigeria (CBN), from 55.0 in October to 55.9 last month.

More specifically, the first three quarterly results of companies listed on the exchange generally reveal improvements in earnings and profit among players in consumer and industrial goods sectors, most of which beat expectations to reflect the impact of the CBN’s intervention in the foreign exchange segments of the inter-bank market.This is because most of these companies rely on forex in one way or the other to source raw materials, particularly when there are no locally available alternatives. Another important factor is the declining rise in headline inflation over the past nine months. Expectedly, these improving numbers have also impacted the price movement of these companies. 

During the month’s 22 trading sessions, the market was up in 15 and down in seven, continuing a two-month uptrend that impacted year-to-date gain positively, lifting it to 41.19%,which is attributable to factors mentioned above. These have ensured that the Nigerian stock market remains one of the best performing in Africa and globally as many stocks on the exchange remain relatively undervalue, despite its high margin of safety.

Meanwhile, the composite NSE All-Share Index in the month gained a total of 1,264.31 basis points, closing at 37,944.60 after touching a high of 38,057.71 and low of 36,427.31 within the period, compared to the 36,680.29 at which it opened. The closing point represented a 3.45% growth during the month on a strong buy-market position that impacted on stock prices to sustain the uptrend to the recent year resistance level that any breakout will confirm new rally.

Buying pressure of the total transactions for the period was 93%, and selling position, 7% to sustain the  bull-run in the last quarter of the year,while volume index for the period stood 1.60.Market capitalisation gained N519.64 billion to close higher at N13.22 trillion, from N12.69 trillion, representing a 4.18% value gained. The uptrend continue on impressive numbers as foreign investors increased their position in the market in reaction to more positive macro-economic data that being released. 

Transactions in volume and value  for the month were up by 74.87% and 84.75to 10.02bn shares worth N117.86bn,as against the 5.73bnunits valued at N63.8bn recorded in the preceding month.

Market breadth for the month was positive with the advancers outnumbering decliners in the ratio of 42:31 to continue the bull transition, irrespective of mixed sentiments and profit taking during the period.

Sectoral indexes performance chart followed the path of the composite index, except for the NSE Consumer Goods and NSE ASeM that closed on the down side. The bar chart below shows that the NSE Premium and Lotus indices drove the market the most in the month under review, with the former gaining 7.73%, as a result of  price appreciation of  Dangote Cement and FBNH, while the later followed with 6%. They thereby outperformed the composite NSE All-Share Index during the period, ahead of the NSE Industrial index which climbed 4.66% up to reflect the improving performance of the companies in that sector, while the NSE Pensionand  NSE30 indices grew 2.96% and 2.36% respectively, revealing investors’ interest in blue-chip and dividend-paying stocks, amidst the oscillating sentiments and attractive low Price-To-Earnings ratio attraction.

Other sectors that closed up during the month were: The NSE Banking, NSE Insurance, NSE Main Board and NSE Oil/Gas.

Sectoral indexes that closed in the red are NSE Consumer Goods and NSE ASeM, shedding 0.82%and 0.05% respectively, creating opportunities for investors and traders to position, due to their improved earnings that will continue due to impact of the positive macro-economic data on the sectors and economy.

Best And Worst Performing

Best performing stocks for the period under view was Fidelity Bank, which rallied on the strength of its successful Eurobond outing and improved numbers, with positive sentiment as a leader among the nation’s second tier banks. It gained 35.53% of its opening price; followed by another service provider–NahcoAviance, which appreciated by 32.31%; ahead of Diamond Bank’ 24.75% notch, while consumer goods followed in this step- Cadbury climbed 23.24%, International Brewery and Dangote Sugar were up by 22.27% and 20.33% respectively.  Low and medium caps top the best performing stock table for the month which included: Medview Air with 19.17%; FBNH  15.16%, Forte Oil 14.98%, Eterna, 14.59% and Caverton, 13.49%; among others.

Best Performing Stocks in November
Securities	Sector	Open	Close	% Change
Fidelity Bank	Financial	1.52	2.06	35.53
Nahco	Services	3.25	4.30	32.31
Diamond Bank	Financial	1.01	1.26	24.75
Cadbury	Consumer Goods	10.50	12.94	23.24
International Breweries	Consumer Goods	48.99	60.00	22.47
Dangote Sugar	Consumer Goods	15.00	18.05	20.33
Med-view Airline	Services	1.52	1.82	19.74
FBNH	Finanical	6.20	7.14	15.16
Forte Oil	Oil/Gas	40.00	45.99	14.98
Eterna	Oil/Gas	3.70	4.24	14.59
Caverton	Services	1.26	1.43	13.49
NEM	Insurance	1.25	1.41	12.80
University Press	Services	2.15	2.39	11.16
Boc Gas	Industrial Goods	4.15	4.58	10.36
United Capital	Other Financial	3.01	3.30	9.63
Dangote Cement	Industrial Goods	224.00	245.00	9.38
Dangote Flour	Consumer Goods	9.53	10.30	8.08

Source; Investdata Research

The worst performing stock for the period wasLinkage Assurance, whichshed 27.91% of its opening price, amidst profit taking and activities of market forces; followed byC&I Leasing, which lost 24.72% also as a result of profit booking and its proposed primary activities/share reconstructing. The share price of Newrest ASLfell by 20.45%; Nigerian Breweries closed 11.80% lower for the month on serious profit taking, making it attractive at its current price; just as Champion Brewery dropped10.98% on the back of market forces.

Worst Performing Stocks in November
Securities	Sector	Open	Close	% Change
Linkage Assurance	Insurance	0.86	0.62	-27.91
C&I Leasing	Services	1.78	1.34	-24.72
Newrest ASL	Services	7.48	5.95	-20.45
Nigerian Breweries	Consumer Goods	150.00	132.30	-11.80
Champion	Consumer Goods	2.46	2.19	-10.98
Neimeth	Healthcare	0.60	0.51	-10.77
GSK	Healthcare	31.98	27.46	-9.52
UACN	Conglomerates	26.00	23.00	-6.87
Vitafoam	Consumer Goods	1.50	1.33	-5.72
Transcorp	Conglomerates	165.00	150.00	-5.56

Source: Investdata Research

Technical View on Monthly Time Frame

Index action for the month remained in the rising channel and above the 20/50-Day moving average on improved trade volume, while reflecting the increasing demand for stock as market and economic fundamentals continue on the path ofgrowth to keep strong momentum despite the mixed sentiments and strong volatility. With the improved economic data and current trading pattern, ahead of Santa Claus and year-end rally in preparation for full year earnings reporting season in Q1 2018, market technicalsremainpositive. Thisis likely to remain so in the new month as seasonal changes and impact of oil price remain at play in the market.

Where To Invest In Hope Of Santa Claus, Year End Rally

The global economy recorded stronger recovery and growth in recent times as revealed by the piles of positive data emanating from the developed world in the form of stronger GDP numbers, especially the rise in commodity prices, particularly crude oil. Despite these, uncertainties are mounting high with the recent North Korea missile attack on the U.S. border and geo-political issues that remain a cause for concern among investors.  Economic risk of rate hike in the amidst economic growth as Q3 GDP  and  other data continue to push stock markets up, despite the long expected  correction due to  over- valuation.  

Back home, the possibility of market breaking out of the recent resistance level is high with the trend ability and momentum that rebounded after Moody’s downgrade and MSCI reshuffling induced pullbacks. This is due to end of year expectations that triggered demand for stocks on the strength of stronger corporate earnings and stronger inflows as positive macro-economic data confirmed that the economy is on the growth path,notwithstanding the fact that it is slow at 1.4% as shown in the Q3 GDP figure released by the National Bureau of Statistics (NBS).

In the new month, we expect inflation for the month of November to continue its gradual downward movement; just as the PMIhas further improved to support recovery in the manufacturing sector given that Q3 numbers from the sector beat market and analysts’ expectations.

With only few quarterly earnings expected in this month and new trading pattern unfold as a result of seasonal changes, investors and traders are expected to reposition and balance their portfolios ahead of full year earnings in 2018, based on their interpretation of the scorecards and changes that will keep the market oscillating.

The Q3 numbers had revealed the financial position and health of the companies and indeed the market, while the low valued stocks with high upside potentials should be the target of investors. The strong intrinsic value remains a plus and should guide investors to know where to look while seeking to invest profitably for the remaining days of the year and beyond.

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 any pullback in prices to position in some sectors for short, medium and long term gains, especially in the fast moving consumer goods, banking, agribusiness, building material and healthcare after carefully study of the recent price pattern and fundamental data available in the market.

What to expect in December

·         The extension of the oil production cut to December 2018 is likely to have positive impact on crude oil price and influence government revenue positively which may also attract more inflow in the economy in form of portfolio or direct investment that will support the market. 

• Seasonal trending with few late filers of quarterly numbers expected, with no impact on the market. However, blue-chip companies will continue to oscillate on the strength of company and market fundamentals as repositioning and rebalancing stays till end of the year.
• The oscillating trend of equity prices as a result of repositioning of portfolio along the line of positive numbers by foreign and local investors will boost activities in the final month of the year.
• Market outlook for the new month remains mixed as few quarterly and no full year earnings are expected. But positive sentiments and strong momentum may not be out of place as the market expects the economic recovery to be strengthened with the last minute implementation of the 2017 budget. 
• The relative low Price-to-Earnings ratio in the market may further attract demand for stocks. Investors must however 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.