The Nigerian Stock Exchange All Share index (NSEASI) plummeted by 13.00% WoW, following five consecutive trading days of losses which positioned the index level at 23,514 points. The week’s loss further stretched the market’s Year-to-Date return to -17.90%. Volume and Value of transaction appreciated substantially by 102% and 219% WoW accordingly. Market breadth pegged at 0.10x as only six (6) stocks appreciated in the week, while fifty-nine (59) stocks waned in share value.
The gainers’ chart was championed by ASHAKACEM, CUSTODYIN and HONYFLOUR, recording the week’s highest returns of 10.42%, 4.68% and 4.05% in the same order. The laggards table featured, OANDO, UNITYBNK and ZENITHBANK with 31.03%, 27.06% and 26.82% losses respectively.
During the week, shareholders of VITAFOAM and VONO met to conclude discussion on the proposed merger of the two companies and the modus operandi going forward. Following the release of the two companies FY2015 performance scorecards, VITAFOAM proposed a dividend of NGN0.25, with closure and payment dates of 19th February and 14th March 2016.
Given investors’ apathy towards the equities market, coupled with the dearth of positive news inflows amidst unfavourable economic fundamentals, we do not anticipate a quick revamp in market performance in the near term. However, we expect some investors to take position in fundamentally justified stocks trading below their intrinsic value in order to average down losses on their portfolios.
In this report, we review the performances of different segments of the financial market, while presenting our expectations for the coming week.
Fixed Income: Naira returns +1.05% YtD at the Interbank
Market liquidity remained significant, keeping NIBOR and money market rates pressured for most of the week. However, there was a decline in liquidity in the course of the week due to a combination of DMBs depositing funds for the CBN’s FX intervention, and the OMO auction held during the week.
Average NIBOR advanced by 0.10% WoW to settle at 7.49%, as the CALL (-0.21%) and 1M (-0.05%) tenor rates declined week-on-week, while the 3M (+0.32%) and 6M (+0.34%) tenor rates advanced. Also, money market rates fell by 33 basis points, with the OBB and OVN rates settling at 0.88% and 1.21% accordingly.
Yields on the Treasury bills decreased by 0.38% on the average, as significant levels of liquidity buoyed demand levels. The average yield settled at 5.89% across all instruments at the close of the week.
Activities in the bond market remained tempered, as the average offer yield advanced by 0.72% WoW across instruments, to close at 11.20% and 11.48% for the Benchmark and Off-the-run bonds respectively.
The value of the domestic currency declined consistently for most of the week at the interbank market, but rallied on the last day of the week to push the mid-price to NGN197.23/USD (+1.05% YtD). Also, the Central Bank of Nigeria decided to lift the ban on US Dollar deposits by DMB customers, while also taking the decision to halt Dollar sales to BDC. This was partly responsible for the performance of the currency at the parallel market, where the currency fell to a new low of NGN290.00/USD.
Agric. Sector: Negative sentiments permeate sector
Measured by the MERI-AGRI index, the Agric. sector closed the week in the negative territory, paring by 5.05% WtD. However, with a 3.53% Year-to-Date return, the sector remains the only sector with a positive showing on a YtD basis.
LIVESTOCK and OKOMUOIL waned by 9.70% and 9.96% to settle at NGN1.21 and NGN32.64 respectively, while ELLAHLAKES, FTNCOCOA and PRESCO stayed flat.
The poor showing of the sector reflects the impact of the bearish sentiments that rocked the overall equities market over the week. We advise discerning investors to consider stock fundamentals in decision making at this time.
Banking Sector: New Year brings no respite as index plunges 22%
The New Year has brought no respite for the worst performing sector of 2015, as the banking sector declined by 22.03%, to bring the YtD return to -26.32%. There was one (1) gainer and fourteen (14) decliners to peg the sector’s breadth at 0.07x.
The banking sector, much like the market in general, has been under significant pressure as consternation rises due to expectations that there may be a significant decision take regarding the naira at the next MPC meeting.
Consequently, some of the sector’s stocks are currently trading near their 5-year lows.
While we acknowledge that the sector’s returns may probably remain depressed until after the MPC decision, we advise investors to look past the current state of the market and invest in the sector’s fundamentally justified equities.
Consumer Goods: Market prices dive across board
Mirroring the somber mood of the general market, all the counters within the Consumer Goods sector have recorded negative Year-to-Date performances, save for VONO which has returned 13.58% YtD. Consequently, measured by the NSEFBT10 index, the sector’s WoW and YtD returns pegged at -9.05% and -18.06% accordingly.
The week’s gainers chart featured HONYFLOUR and AGLEVENT which recorded respective gains of 4.05% and 3.39% WoW. Conversely, CADBURY, UACN, NASCON, PZ, NB, and 7UP had the highest value declines, with respective WoW losses of 18.40%, 16.83%, 14.00%, 13.78%, 11.51% and 10.14%.
During the week, Vitafoam Nigeria Plc. released its FY2015 performance scorecard, showing 2.83% YoY increase in turnover, while Earnings-After-Taxes declined by 42.83% YoY. The company proposed a dividend of NGN0.25, with closure and payment dates of 19th February and 14th March 2016. Also, Vono Products Plc’s scorecard showed a decline in turnover and earnings of 10.86% and 753.26% YoY accordingly.
We do not anticipate a relief from this apathy in the near future, given our outlook for the general market, and the Consumer goods sector. However, we note that position taking opportunities exist for investors with long term horizon, though we note the inherent risk given current market apathy.
Health Care: Sombre mood persists
There was a spillover of the weak mood on sector stocks from the prior year, as the sector returned -9.47% Week-to-Date to peg the Year-to-Date return at -20.28%. Three stocks shed prices, while other counters traded flat in the week.
The decliners’ chart was led by GLAXOSMITH which pared by 9.73% WoW to NGN 27.08, trailed by MAYBAKER and NEIMETH with price declines of 9.52% and 3.37% WoW to peg prices at NGN0.95 and NGN0.86 accordingly. Other counters in the sector traded flat.
The persistent weak sentiment on the sector stocks were in line with the general bearish market mood. As such, we advise value seeking investors to trade only on fundamentally justified stocks capable of delivering value in the event of a market rebound.
Industrial Goods: Heavyweights drag sector returns
The industrial goods sector, at the end of the week, plummeted by 16.21% as measured by our Meri-Industrial index. Market breadth (0.14x) for the week skewed towards the seven (7) laggards, as against a sole advancer.
ASHAKACEM was the week’s only gainer, appreciating by 10.42% to close at NGN26.50. On the flip side, WAPCO suffered the heaviest decline during the week, as it plunged by 17.38% to close at NGN86.75. The ticker was followed closely by DANGCEM which shed 16.87% at the end of the week. CUTIX, CCNN, BERGER, PORTPAINT and CAP returned -8.23%, -4.95%, -4.76%, -0.25% and -0.03% accordingly to make up the losers’ list.
In line with the bearish trend of the overall equities market, stocks in the industrial goods sector have remained pressured by the negative sentiments amongst investors. On this note, we reiterate our cautious trading advice, particularly for the early parts of the year.
Insurance Sector: CUSTODYINS the sole survivor
In line with the bearish sentiment that permeated the general market in the week, the NSEINS10 Index tumbled by 4.21% WoW, positioning the sector’s YtD return at -5.20%. There were five (5) losers and one (1) gainer to peg the sector’s breadth at 0.20x.
CONTINSURE recorded the highest loss in the week, having pared by 14.56% WoW to close at NGN0.88. The counter was closely followed by LAWUNION (-12.33%), AIICO (-10.87%), NEM (-10.29%) and MANSARD (-4.85%). CUSTODYINS on the other hand, advanced by 4.68% WoW, to settle at its year high price of NGN4.25.
Goldlink Insurance Plc. released its H1:2015 financial scorecard during the week. Gross premium Earned (GPE) and Profit after Taxes (PAT) respectively waned by 40.52% and 404.98% YoY to NGN1.17bn and -NGN0.73bn accordingly.
We expect the sector’s performance to remain largely dependent on investors’ sentiments toward the equities market in the near term. Also, due to the dearth of positive news inflow to steer investors’ appetite, we anticipate the general market and the insurance sector stocks performances will remain pressured in the near term.
Oil & Gas Sector: NSEOILG5 index plunges 4.93% WtD
The sectors’ performance in the week was overwhelmingly bearish (-4.93% WtD), buoyed on negative investor sentiments triggered mostly on stocks of companies with upstream operations. The sector breadth settled at 0.25x, as four (4) stocks pared against a lone advancer.
OANDO (-31.03% WoW) nosedived in the week to close at NGN3.80, closely trailed by ETERNA and SEPLAT which slumped by 16.95% and 9.75% WoW correspondingly, while MOBIL shed 4.61% WoW. TOTAL advanced by 1.01% WoW to close at NGN150.00. Other stocks traded flat.
The price of crude oil as measured by Brent remained pressured in the week, sliding by 11.54% WoW to hold at USD29.68pb.
Given the current negative market mood, we advise investors to trade with caution, whilst investing in counters that are fundamentally justified with a long term investment objective.
Services Sector: LEARNAFRCA re-emerges above peers
The sector traded much in line with the overall market, as our MERISER index returned -3.90% Week-on-Week. Four (4) stocks pared against a lone stock that gained, pegging the sector breadth at 0.25x.
LEARNAFRCA for the second consecutive week was the sector’s top performer, gaining 1.22% WoW to settle its share price at NGN0.87. On the other hand, NAHCO led the week’s underperformers, paring by 14.02% to end the week at NGN3.25. TRANSEXPR (-8.70%), IKEJAHOTEL (-5.20%), and REDSTAREX (-0.99%) trailed behind.
The current bearish market condition presents an optimal time for investors to take position in stocks trading below their fundamentally justified prices, however, we advice investors to be cautious in position taking.
