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Published On: Tue, Nov 28th, 2017

FBN leads the bulls in 2017

…Stanbic IBTC, Flour Mills show strength


Equity investors are showing signs of increasing optimism as the year comes slowly to a close.

The Nigerian Stock Exchange’s All Share Index (ASI) ended last week at a staggering year to date yield of 39 per cent which compares favourably with South Africa’s Johannesburg Exchange’s (JSE’s) year to date yield of 19.1 percent and Hong Kong- Hang Seng’s yield of 35.8 percent and London’s FTSE 250 yield of 10.3 percent.

Even though many investors are still observing the market from far, a few whose investments are there are optimistic. There is almost a certainty that the market will close in the positive at year end. This assertion is reflected in the market indicators which reveal that the equity benchmarks, the All share index and market capitalisation have gained about 38 per cent and 39 percent respectively year to date.

The nightmare of 2008 and 2009, and even 2016 when value of stocks were almost completely eroded is gradually being forgotten as stakeholders are more determined to face the future.

Analysts have recognized that some companies in the capital market which have provided a basis for investors to feel a sense of achievement in their investment choice appear bullish. These include UACN Plc, Guinness Nigeria Plc, Nigerian Breweries Plc, Nestle Nigeria Plc, GT Bank Plc. Others are Zenith Bank Plc, First Bank of Nigeria Plc, Dangote Cement Plc, UBA and Cadbury Nigeria Plc. BH research reveals that their stocks have outperformed the market this year to date.

For instance, Stanbic IBTC Holdings has gained 170 .8 per cent from January to November 2017. FBN Holdings stock appreciated 102.9 per cent from N3.40 per share early in the year to N6.90. Flourmills Nigeria has also advanced by 93.83 per cent, G T Bank has gained 77.08 per cent, while Access Bank is up 68.8 per cent and Zenith bank stock has garnered 66.3 per cent.

Similarly, Glazo Smithkline has chalked up 60.3 per cent. Nestle Nigeria Plc has appreciated by 54.6 per cent, while UBA 53.54 per cent and PZ Cussons 40.68 per cent. Others which have per formed well but not better than the market include Dangote Cement 32.19 per cent, Seplat Petroleum 30 per cent, Lafarge Cement 22.1 per cent, Guinness Nigeria 21.61 per cent, Cadbury Nigeria 20.44 per cent. Other lesser performers are ETI 19.2 per cent, UACN 12.36 per cent, Union Bank 11.2 per cent and CAP Plc 6.25 per cent.

These stocks, experts reckon, are stocks in well-known and highly respected publicly- traded companies. They believe that blue chip companies are usually financially sound and are thought to be relatively low-risk investments. They tend to be less volatile than other companies and provide solid growth to portfolios.

The attraction emanates from their formidable stance in terms of share price even in bad times. Investors have always loved to bet on such stocks that display good fundamentals in the market place. Besides, most of them have been the highest valued stocks given the high prices. Investors have reaped good returns from some of these companies. And a few of them have, also paid higher dividend over the years.

The recent bullish market, analysts have attributed to the seemingly positive changes in the economy.

The economy is emerging stronger given the latest figures from the Nigerian Bureau of Statistics (NBS) that Nigeria’s Gross Domestic Product (GDP) has grown by 1.4 per cent, a sign that economic activities may be picking up after a deep recession through 2016. The price of crude has been relatively stable, hovering between $60 per barrel and above. The volume of production has also been stable given the relative peace in the Niger Delta. In fact, it is speculated that Nigeria pumps about 2 million barrels per day presently.

There has also been some reprieve from the creative handling of Forex by the Central Bank of Nigeria (CBN) which introduced the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology (NAFEX). The CBN created the new window to boost liquidity in the foreign exchange market and ensure timely execution and settlement for eligible transactions.

This window appears to have attracted more portfolio investors into the market. Those who had, hitherto pulled out of the financial market during the recession in 2016 seem to be returning in droves. These have helped in no small way to create some level of confidence in the Nigerian economy despite recent low ratings by Moodys.

Factually too, the National Bureau of Statistics (NBS) revealed that the value of capital imported into Nigeria in the second quarter of 2017 rose by $884.1 million to stand at $1.79 billion, representing 95.02 per cent increase.

According to NBS, Portfolio investments increased by 128.4 per cent, from the $337.3 million recorded in second quarter of 2016. And Portfolio investment was the largest component of imported capital in the second quarter of 2017, put at $770.5 million, or 43.0 per cent of the total.

‘’The game changer is the economic recovery from stagflation. Then the forex window NAFEX which the CBN created has precipitated the recovery of the market’’, said the Managing Director/CEO of highcap Securities limited, Mr. David Adonri.

However, the CBN governor, Mr. Godwin Emefiele has always called for caution in celebrating the economic recovery, believing that it is still fragile.

When this is juxtaposed with the MPR at 14 per cent and Cash Reserves Ratio at 22.5 per cent, liquidity Ratio at 30 per cent, there are palpable fears that the bullish trend may not be sustainable.

Others have fingered inflation rate though being tamed at 15.9 percent have reduced significantly the volume of money in the hands of not only the investors, but also the amount of funds that banks can trade with and high unemployment are still threats to the bullish market.

Whereas, it is difficult to predict with accuracy the capital market, analysts can make projections based on macro and micro economic environment of any country which is not convincingly in favour of Nigeria now.

Never the less, many investors still remember with nostalgia when the market capitalization peaked at about 13.1trillion and the All-share Index gained a giddy height of 66,551.84 basis points on March 5, 2008. Most of the equities grew bullish and the Nigerian Capital Market was thrown into frenzy.

The market became the toast of the Nigerian Business community, with traders, civil servants, farmers and even students making equity investments.

Many analysts noted that the Nigerian Stock Exchange (NSE) was a beehive of activities with both investors and speculators scrambling to make a kill. Some individual stocks recorded over 100% appreciation while others edged up by 50% and above. However, market stakeholders have always said that period was abnormal and may never return.

Findings by BH reveal that though the market is relatively strong in a weak economy, it is difficult to predict with any amount of certainty its future. However, the market over the years had gained 65% in 2003;18.5% in 2004;1.01% in 2005;37.80% in 2006;74.73% in 2007; and lost -45.77% in 2008. It also lost -33.80% in 2009 and took a rebound to gain 18.50% in 2010.The market slipped back in the negative by -17% in 2011, gained – 35.4% in 2012, gained 47.19% in 2013, lost by -16.14% and close in the negative by about -17.3% in 2015 just as market closed at -6 per cent negative in 2016.





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