One thing is certain; investors remain optimistic and anxiously waiting for the 2012 corporate earnings results. Prices of most stocks are currently below their 2013 year high – this is an indication of entry signal at the moment. We expect the positive sentiments to remain in the near term as no potential macro or fiscal threat exists.
Market activity started off the week on a low tone as investors remain cautious on positions taking. Expectations of 2012FY results and corporate actions are the major catalysts to market direction, given that some stocks have rallied and surpassed our 2013 target prices.
Similarly, opportunities abound in a number of counters not only because they are relatively underpriced but also that, if their historical and Q3:2012 performances are anything to go by, smart and active investors are taking positions now to reap both capital appreciation and dividend yields.
Dissecting the first trading day activity further, the total value and volume done were N2,561,230,707.67 and 230,584,927 units, respectively; these represented 44.57 percent and 46.33 percent decline in value and volume accordingly. The All-Share Index gained 89bps, which was the second highest in the last 16 trading days. This gain was however driven by Dangote Cement (the outlier with 25% stakes of the entire market) which gained 3.9 percent to close at N147.
From the sectoral decomposition, MERI Industrials led the gainers’ chart with 3.19 percent, courtesy of Dangote Cement, followed by MERI Agric with 2.47 percent.
MERI-Consumer Goods lost 3.49 percent with Guinness paring 3.81 percent to close at N265.01, the year low. At the close of trade, NSE ASI and market capitalisation were respectively 33.243.53pts and N10.638 trillion while YtD return settled at 18.39 percent.
Looking ahead, we expect market activity to remain low, though we expect the WtD return to be positive. Aside cautious position taking pending when 2012FY results start coming out; declining foreign inflows are also impacting on market activities. We do not expect significant gains. We forecast a gain of <0.5 percent for the week.
Market review of previous week
The NSE ASI gained 0.31 percent this week to bring the YtD return to 17.35 percent. Top on the gainers chart for the week were CCNN (20.17%), ABCTRANS (11.86%) and FO (11.26%), while the top losers includes CILEASING (-11.94%), Access (-11.3%) and CORNERST (-10.71%).
Most banking tickers headed south towards the end of the week, with Access shedding 8.85 percent (the largest single day loss in 2013). While we do not see any near term threats justifying this sharp decline, we advise against panic selling as banking stocks remain toasts of the market, especially from the expected 2012 dividend yields perspective.
Fixed income: The decline continues
Market yield continued a downward trend during the week, albeit marginal. The DMO auctioned FGN April 2017 and FGN January 2022 bonds worth N35 billion each at yields of 10.7 percent and 11.08 percent, respectively, lower than the last re-issue. Heavy demand in the secondary market, particularly at the short end of the yield curve has kept T-bills on a downward trend. For example, the 30 day T-bills declined from 10.7 percent on Monday to 10.33 percent as of Friday.
Yields on the Nigerian $500 million Eurobond due for maturity 2021 fell 2bps to 4.20 percent this week. The naira halted a 5-day decline Tuesday, closing 0.6 percent stronger at 158.65 percent. Given that the local currency has lost about 1.5 percent in 2013, exchange rate stability remains a prime consideration as the MPC meets next week. The CBN reduced dollar supply by 6 percent this week to $360 million, an unlikely repeat in the coming week.
February inflation inches to 9.5 percent. We expect March inflation to peg at 9.53 percent
Data released by the National Bureau of Statistics (NBS) put February 2013 inflation at 9.5 percent – a 50bps above the 9 percent recorded in January. The details of the release are presented below:
The Consumer Price Index (CPI) for February increased to 9.5 percent year-on-year, compared with the 9 percent in January 2012.
The increase in the CPI is attributable to the increase in prices of farm produce, owing to the limited supplies from the recorded decline in the inventory. Food index increased 11.0 percent to 143.3 points, compared with the 10.1 percent increase in January.
Core index remained stable owing to the stable prices of processed food items. It averaged 11.2 percent compared with 11.3 percent it closed last month.
We highlight this notch in the inflation as a major consideration for a possible retention of the CBN’s tight monetary policy, as the economy is yet to wittiness a clear downward trending inflation.
We analyse further the salient figures as contained in the January Inflation data.
While the base effect that characterised January 2013 inflation looks de-emphasised, we do not completely alienate a higher 2012 base as a contributory factor to the single digit inflation of 2013 so far.
On a month-on-month basis, the CPI increased by 0.75 percent, compared with the 1.12 percent recorded in January.
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