Year-to-date return pegs at -18.83%

The Equities market index pared consistently, on all trading days of the week ended, to record Week-on-Week (WoW) and Year-to-date (YtD) losses of 2.46% and 18.83% respectively. The volume and value of transactions for the week significantly declined by 61.56% and 69.43% correspondingly, indicating reduced activities and weak investor’s sentiments. The market breadth pegged at 0.48x, as 20 stocks advanced against 42 decliners.

PORTPAINT led the week’s gainers chart, as the counter’s market price advanced by 9.92%. Also featuring on the chart were ETRANZACT, and LIVESTOCK which recorded respective gains of 5.31% and 5.00% accordingly. DANGFLOUR on the reverse side recorded the highest value loss, declining by 26.09% WoW following the news flow from the parent company. The counter was trailed by OANDO (-19.58%) and STANBIC (-11.78%).

The National Bureau of Statistics (NBS) released the GDP report for 9M2015, which indicated that economic activities improved mildly during the period as evidenced by the GDP growth of 2.84% YoY (vs.2.35% in 6M2015). The Monetary Policy Committee (MPC) is also scheduled to sit in the coming week, we anticipate that the committee will consider the current depressed yield levels in the bond market, recently released inflation and GDP reports, FX markets realities as well as Barclays’ announcement to exclude Nigerian bonds from its Emerging Market Local-Currency Bond index (EM-LCBI) next year.

In this report, we expect that the outcome of the MPC meeting will impact activities within the market, amid other sector and general market information. We review events in the economy, laying emphasis on the performance of different segments of the financial market, while presenting our expectations for the coming week.

Fixed Income …Naira pared in value week long

Interbank market rates pared by 1.08% WoW, pushing the year-to-date change to -3.78%on the average, although rates hiked marginally due to fund sterilization and provisions for the apex bank’s FX intervention during the week. We believe that the continuous downwards trend is due to market liquidity level, this has reduced the need for debt instruments as market players satisfy needs internally. Money market rates changed by 0.28% on average to peg at 1.09%.

Demand for Treasury Bills was relatively low during the week despite system liquidity, this we believe was due to the scheduled Primary market auction. The CBN sold T-bills worth NGN119.939bn, with the stop rates pegged at 5.34%, 7.25% and 8.50% for the 91-day, 182-day and 364-day bills accordingly. Average yield across instruments closed the week at 5.20% (+0.87% WoW). Market information suggests that demand within the market might not be sustained at the current level across instruments, we anticipate more focus on the shorter termed instruments. The FGN Bonds instruments mirrored the outcomes in the T-bills space in most trading days of the week. Consequently, average offer yield advanced by 0.26% WoW to close at 11.59%.

The Naira depreciated consistently during the week, paring by 0.23% WoW to settle its mid-point at NGN197.99/USD (vs. NGN197.54/USD at the start of the week).

Agric. Sector: OKOMUOIL dictates WoW direction.

The Agric. sector reversed the previous week’s bullish showing to close the current week negative. The sector’s performance, as measured by our MERI-AGRI index, was recorded at -4.15% WoW resulting in a year-to-date return of 14.10%.

Only two stocks recorded price movements at the end of the week. OKOMUOIL shed 8.89% WoW to close at NGN26.33 while LIVESTOCK gained 5.00% in the same period. All other tickers within the sector stayed flat during the week.

Measuring with our sector Indices, the Meri-Agri index remains the only sector with a positive return in the year thus far, buoyed by the performances of OKOMUOIL and PRESCO. However, the strong negative sentiments of the overall market appear to have permeated into the sector in recent times.

Banking Sector: Bearish sentiments extend into 4th consecutive week

Trailing the general market mood, banking sector performance as measured with the NSEBNK10 recorded a 3.91% WoW decline, resulting in a YtD return of -16.42%.  This week’s bearish outing extends the sector’s red performance to the 4th consecutive week, predicated upon by 11 decliners, 3 gainers and one flat outing of component companies.

The three (3) sector advancers were STERLNBANK (2.05%), ACCESS (1.91%) and UBN (1.23%), while FIDELITYBK traded flat in the week. On the flip side, STANBIC led the laggards, shedding 11.78% in price to close at NGN18.43, followed by GUARANTY (-8.04%), FCMB (-6.50%), SKYEBANK (-4.95%) and UBA (-4.23%).

As with the market in general, we do not see this trend reversing in the shorter term, owing to the absence of cheery news to ignite such upturn. We advise investors to consider stock fundamentals in trading on sector counters given that the current pressured price levels portend some upside potential over the long term.

Consumer Goods:DANGFLOUR pares by 26.09% WoW

Sentiments toward the Consumer Goods and Conglomerate sectors were predominately bearish week long, this was reflected by respective week-on-week returns of -2.68% and -1.68% as measured by our Meri-Consumer goods and Meri-Conglomerates sector indices.

7UP, UACN, CADBURY, NESTLE,VONO and PZ were the only gainers for the week, advancing by 1.92%, 0.41%, 0.86%, 4.97%, 2.27% and 0.96% accordingly. UNILEVER retained market prices at NGN36.38.

DANGFLOUR, NB, HONYFLOUR, VITAFOAM,GUINNESS, FLOURMILL and AGLEVENT recorded the highest value declines of 26.09%, 6.03%, 5.74%, 5.14% 4.99%, 4.50% and 4.49% accordingly.

Dangote Flour Mills Plc, now under the brand name Tiger Branded Consumer Goods Plc, informed the market and shareholders of the exit of some of its board members, including Alhaji Aliko Dangote. The company also stated that the parent company  “Tiger Brands Limited” have decided not to provide further financial support to the company. This implies that DANGFLOUR will need to explore alternative means of financing its operation activities going forward. We opine that the significant decline in DANGFLOUR’s share value during the week was triggered by this newsflow.

We believe the sector performance during the week was also influenced by the negative sentiments in the general market. In the coming week, we do not anticipate a resurgence despite the depressed market prices.

Health Care: NEIMETH pares by 8.16% WoW

Level of activities, within the sector, in the just concluded week was relatively sombre as measured by our Meri-Healthcare index, which returned -0.02% WoW. There were no gainers, two counters pared in value while others retained their price levels from the previous week.

NEIMETH and MAYBAKER recorded the sector’s only price change, declining by 8.16% and 7.89% week-on-week respectively. The counters closed at corresponding market prices of NGN0.90 and NGN1.05. FIDSON, GLAXOSMITH, PHARMADEKO and EVANMED retained their market price at NGN3.00, NGN37.07, NGN2.14 and NGN0.50 respectively.

We anticipate some position taking in the coming week, given the relatively low market prices of component companies, though we are not enthusiastic about a sustainable resurgence.

Industrial Goods: PORTPAINT gains 9.92% WtD

The industrial goods sector, measured by our Meri-Industrial sector index, closed 0.47% down at the end of the trading week. The sector’s market breadth (0.75x) skewed in favour of the 4 stocks that traded negative, against 3 advancers.

PORTPAINT, the week’s top advancer, enjoyed value increase of 9.92% to close at NGN3.88. ASHAKACEM and CUTIX improved on their previous week’s closing prices by 4.50% and 3.45% respectively.

CAP was the week’s greatest decliner, shedding 4.93% of its value to close at NGN38.93. PAINTCOM, DANGCEM and BERGER also featured on the losers’ log, depreciating by 4.39%, 0.56% and 0.10% respectively.

The prior negative sentiments towards the sector, gradually waned off as seen in the performance of constituent stocks this week relative to the prior week. With most of the stocks trading below their intrinsic prices, we expect drips of bargain hunting in the sector as we approach the end of the year

Insurance Sector: Impressive Earnings releases from GUINEAINS

The sector recorded a 0.21% loss during the week, as 2 stocks recorded losses during the week, while a lone stock appreciated in value. On this backdrop, the year to date return settled at -5.83%, as measured by the NSEINS10 index.

Owing to profit taking activities onCONTINSURE, the counter recorded the highest loss in the sector, paring by 1.96% WoW to close at NGN1.00 (vs. NGN1.02 in the prior week). The counter was trailed by CUSTODYINS, after the counter pared by 1.20% to close at NGN4.10.

GUINEA Insurance Plc. released its 9M2015 performance scorecard during the week. Gross Premium Earned (GPE) for the company grew by 40.25% YoY to NGN809mn, from NGN577mn in the prior period. Profit after Taxes also appreciated significantly by 123.84% YoY to NGN45mn, from a negative position of -NGN187mn in 2014.

We expect the weak market sentiment to persist in the coming week, given the dearth of positive news inflows to spur activities in the sector. We however advise investors’ to temper their optimism with caution.

Oil and Gas Sector: Brent advances by 1.70% WoW

Measuring the sector’s performance by the NSEOILG5 index, the sector recorded a 5.46% loss WoW, to peg the year to date return at -14.13%. Sector breadth (0.33x) skewed in favour of decliners, after 3 stocks declined as against the lone stock that appreciated in value.

ETERNA recorded 2.21% gains week on week to emerge as the lone gainer during the week, pushing its share price to NGN1.85. On the flip side, OANDO, FOand SEPLAT recorded the most losses during the week, after the respective counters waned by 19.58%, 5.00% and 2.16%.

Global crude oil prices remained tempered during the week, although the Brent appreciated by 1.70% WoW to close the week at USD44.35pb.

We attribute the week’s performance to the negative sentiments generally permeating the equities market, consequently some fundamentally justified sector stocks currently trade at relatively low prices. We advise cautious trading in the coming week, as we anticipate that the weak market sentiment might subsist.

Services sector:  Not enough positivity in the market

The services sector closed the week flat (+0.00%) based on our Meri-Services index. Only two stocks recorded positive returns while five stocks diminished in value WoW even as other stocks traded flat.

ACADEMY and LEARN AFRICA emerged the only gainers for the week having recorded gains of 3.51% and 3.08% to close at NGN0.59 and NGN0.67 correspondingly.

On the flip side, IKEJAHOTEL led the laggards with a 6.05% decline in share price. The ticker was closely followed by CAVERTON, NAHCO, REDSTAREX and TRANSCORP with respective losses of 5.20%, 4.25%, 3.53% and 3.24%.

Given our expectations of weak investor sentiments, owing to the still fragile state of the economy, we do not anticipate significant positive trading activities in the coming weeks.

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