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BusinessDay 12 Apr 2018

16 BUSINESS DAY

16 BUSINESS DAY C002D5556 Thursday 12 April 2018 Investor In association with Helping you to build wealth & make wise decisions NSE All Share Index Market capitalisation NSE Premium Index The NSE-Main Board NSE ASeM Index NSE 30 Index NSE Banking Index NSE Insurance Index NSE Consumer Goods Index NSE Oil/Gas Index Year Open 38,243.19 N13.609 trillion 2,564.13 1,713.69 1,087.32 1,746.68 475.44 139.37 976.10 330.69 Week open (29 – 03–18) 41,504.51 N14.993 trillion 2,950.23 1,794.38 988.53 1,874.27 520.57 151.09 978.14 346.91 Week close (06 – 04–18) 40,841.14 N14.753 trillion 2,907.24 1,779.28 978.72 1,846.47 513.67 150.98 967.61 337.31 Percentage change (WoW) -1.60 -1.46 -0.84 -0.99 -1.48 -1.33 -0.07 -1.08 -2.77 Percentage change (YTD) 6.79 13.38 3.83 -9.99 5.71 8.04 8.33 -0.87 2.00 Analysts see upside potentials as market creates attractive entry opportunities HEANYI NWACHUKWU While many stock investors wonder if there is still any room for upside in this second-quarter (Q2) 2018, analysts say the recent dip seen in the market creates attractive entry opportunities in value stocks. The Nigerian Stock Exchange (NSE) All-Share Index (ASI) depreciated by 1.60percent last week to 40,841.14 points while and Market Capitalisation declined to N14.753 trillion. While stock investors showed less interest in equities, only 19 equities appreciated in price in the trading week ended April 6, lower than 40 in the preceding week; 53 equities depreciated in price, higher than 40 equities in the preceding week, while 99 equities remained unchanged, higher than 91 equities recorded in the preceding week. Though the market opened this week on a negative note after a record N150billion loss on Monday, Afrinvest research analysts maintain their positive near-term outlook as investors hunt for bargain opportunities. “We believe the current negative performance of the market is a correction to the bullish run witnessed in the first two months of the year. The weak sentiment also reflects some negative earnings surprises in the earnings season as well as slowdown in portfolio flows into the equity market,” the analysts said. They further noted that the extended selloff “has, however, created attractive entry opportunities in large and medium cap stocks with strong fundamentals”. The local equities market in the trading week to April 6 extended the 3-week consecutive downtrend as the All Share Index declined 1.6perxcent week-on-week (WoW) to 40,841.14 points while year-to-date (YtD) returns moderated to 6.8percent. GTI research analysts in their outlook for the month of April 2018 expect positive economic environment to dictate major activities in the month. GTI expects a positive market bearing in this month. In the meantime, they strongly advise investors to take a keen interest on firms’ fundamentals before taking an investment position on such firms. “We expect to see a lower reading for March inflation, an improved first-quarter (Q1) GDP and improved March PMI (already released). These are expected to have a positive impact on Q1 earnings releases. This would likely buoyed market reprising considering that we have witnessed extended oversold of main indicators as a results of recent market correction and significant profit taking,” according to GTI research analysts. For United Capital, they believe there is still room for further upside “given that the benchmark index currently trades below our base case return of 12.4percent for the year.” “Sentiments will be largely driven by first-half (H1) 2018 earnings scorecards, continued improvement in the broader economy and a lower yield environment,” United Capital analysts added in their most recent daily insight. On the outlook for equities in second-quarter (Q2) 2018, United Capital said “2018 started out on a bullish note, extending the prior year’s bullish sentiments amid optimism in the broader economy and strong full year (FY) 2017 earnings expectation.” “The NSEASI recorded a massive 16percent return in January 2018 alone but corrected 2.3percent monthon-month (m/m) and 4.2percent m/m in February 2018 and March 2018 notwithstanding the sustained improvement in the broader economy. The FY-17 corporate scorecards also impressed. Overall, the NSEASI rallied 8.5percent quarter-on-quarter (q/q) in Q1-18, spurred by the January rally,” United Capital stated. NSE Lotus II 2,560.39 2,698.99 2,660.85 -1.41 3.92 NSE Ind. Goods Index 1,975.59 2,192.12 2,146.20 -2.09 8.64 NSE Pension Index 1,379.74 1,584.56 1,571.86 -0.80 13.92 Deal makers appetite dampen on political risks The political risk will remain a major concern for dealmakers in Africa in 2018, according to a recent report, Resourceful dealmaking: Outlook for Mergers & Acquisition (M&A) in Africa. The report published by Mergermarket in collaboration with specialist risk consultancy Control Risks notes that there has been a dramatic fall in M&A activity, with declines of 25percent in volume and 26percent in value in the first half of 2017, compared with a relatively buoyant 2016. The drop-off signifies growing investor anxiety surrounding governance issues and weaker economic signals across key African markets, according to Imad Mesdoua, senior political risk consultant at Control Risks. “Political risk will continue to pose a major challenge to M&A activity on the continent as several large markets such as Nigeria undertake difficult elections and unpopular reforms to improve their economic outlooks. The political uncertainty and weak macroeconomic situation that accounted for fewer deals in Africa’s largest markets in 2017 look set to ease over the coming year as countries such as South Africa, Zimbabwe and Angola begin to stabilise,” Mesdoua noted. “Specifically, political risk and transparency concerns have become the principal obstacles to successful acquisition in Africa. Ethical and compliance considerations are another major factor clouding the outlook for potential investors,” Mesdoua added. The report found that political uncertainty and relatively weak economic fundamentals have negatively affected M&A activity in Africa. A fall-off in deals was seen in the first half of 2017 compared with a relatively buoyant 2016. Political risk will be a major obstacle to dealmaking in Africa over the next 12 months, according to 84% of respondents. Other risk factors include transparency concerns and completeness of information, which ranked joint first alongside political risk (84percent), as well as compliance and integrity issues (80percent). Almost three-quarters (72percent) of respondents say that getting caught up in a regulatory or criminal investigation is one of the highest risks in relation to a target company’s ethics and compliance standards. Good news though for South Africa, Zimbabwe and Angola: greater political stability and a more favourable economic and business environment are expected to boost M&A activity in the coming year. 72percent of respondents are pursuing coinvestment strategies in Africa as a means of allocating risk more effectively.

Thursday 12 April 2018 C002D5556 BUSINESS DAY Investor Helping you to build wealth & make wise decisions 17 United Capital investment views Bears play first fiddle …as equities reverse previous week’s gains Local equities reverse previous week’s gains, as MPC holds policy rates Domestic equities started the new month on a bearish footing, after reversing gains recorded in the previous week to close 40,814.1points upon shedding 1.6percent week-on-week (w/w). The bearish sentiment was profound in the holidayshortened week as the market closed in the red three of the four trading days. Thus, market capitalization lost N239.6billion to N14.8tillion while Year-to- Date (YtD) return dived to 6.8percent. Performance across sector indices was broadly bearish as all indices declined w/w, led by the Industrial Goods (-2percent) index consequent on sell-offs in WAPCO (-2.4percent) and DANGCEM (-2percent). The Oil & Gas (-1.8percent) and Financial Services (-1.2percent) index trended southwards on account of TOTAL (-4.9percent), MOBIL (-8.5percent), FO (-4.8percent), WEMA (-14.1percent) and ZENITH (-6.8percent). The Consumer Goods (-0.2percent) and Agriculture (-1bps) indices trailed along owing to declines in DANGFLOUR (-13.5percent), INTBREW (-9.7percent) and LIVESTOCK (-1.1percent). Investor sentiment as measured by market breadth declined to 0.4x (formerly 1.0x) indicating the bearish theme that prevailed during the week. However, activity levels remained upbeat as average volumes traded advanced 14.5percent w/w to 441.2mn units while average value traded leaped 59.6percent to close at N6.6bn. We expect bargain hunting on stocks trading at a relatively low price to guide investors’ sentiment. Money Market: Liquidity deluge crushes rates to 2018- lows The money market was awash with cash in the week ending 6th April 2018 as money market rates averaged 3.9percent compared to 20.7percent in the preceding week. The weeks’ liquidity profile was kept afloat by OMO maturities to the tune of N528.9bn, as well as an absence of any significant funding pressure. All-inclusively, money market rates declined on a weekly basis; OBB (down 4.1percent to 4percent) and O/N (down 3.5percent to 3.7percent) w/w. On Wednesday, the Apex bank conducted its bi-monthly Nigerian Treasury Bill (NTB) auction, wherein it successfully re-financed N95.2bn. Demand was robust with a bid-to-cover ratio of 2.1x compared to 1.5x in the previous auction. Notably, the 364-day tenor was mostly demanded (with a bid-cover of 4.6x compared to the 91-day and 182-day tenors, where demand was relatively slimmer with a bid-cover of 1.0x and 0.4x respectively. The auction was carried out at the following stop rates: 91-day (11.75percent vs. 11.95percent at the last auction), 182-day (12.7percent vs. 13percent at the last auction) and 364-day (13percent vs. 13.15percent at the last auction). In terms of liquidity profile, N476.2bn OMO maturities are expected to hit the system this week, however, we expect rates to inch higher considering FX Secondary Market Intervention Sales (SMIS) expected on Monday as well as other probable mopping-up activities by the CBN. Yields: FI players ply into the market amid boisterous system liquidity Sentiment in the fixed income space was broadly the domestic currency saw a fractional increase 2bps and 5bps in official market and the Investors and Exporters Foreign Exchange window to settle at and N305.6/$1 and N360.0/$1 respectively. The outlook of the naira is expected to remain tied to the spate of CBN’s intervention in the spot and forward market. Global equities mixed as trade war fears intensify Equity indices across the globe closed the week that ended 6th April 2018 mixed. In the U.S market, major indices reversed previous week’s gains as fear of trade war erupting between U.S. and China intensified. China in a retaliatory move announced tariffs on about 130 U.S. goods, including a 25percent penalty on U.S. pork and 15percent on fruit while the U.S. proposed additional tariffs on $100 billion of Chinese goods on top of RSA fund price of PFAs as at April 6, 2018 S/N PFAs CURRENT PRICE 1 CrusaderSterling Pensions 3.9187 2 Premium Pensions 3.8462 3 ARM Pension Mgrs. 3.8245 4 Stanbic-IBTC Pensions 3.6868 5 Legacy PFA 3.5444 6 NLPC PFA 3.3622 7 PAL Pensions 3.3614 8 First Guarantee Pension 3.2198 9 Trustfund Pensions 3.2007 10 Leadway Pensure PFA 3.0821 11 SigmaVaughn Pensions 3.0725 12 AIICO Pension Managers 2.9762 13 APT Pensions 2.7649 14 Fidelity Pensions 2.6690 15 AXA Mansard 2.6382 16 FUG Pensions 2.5898 17 OAK Pensions 2.4913 18 Investment One Pension Mgrs. 2.4119 19 IEI Anchor Pension Managers 2.2899 20 Radix Pension 1.9916 21 NPF Pensions 1.4372 bullish, representing an ease-off from the previous weeks’ bearishness that was characterized by liquidity strains. Furthermore, sentiment was guided by spill-over demand from the PMA auction and liquidity dynamics. Overall, average T-bill yield shed 72 basis points (bps) w/w to close the week at 14.2percent; 91-day (down 173bps to 12.9percent), 182-day (down 37bps to 14.5percent) and the 364-day (down 5bps to 15.1percent). In a similar theme, the bulls were at the helm of the bonds market, as average bonds yield fell by 5bps to end the week at 13.7percent, driven by bargainhunting in the 3-year and 10- year maturities (where yields fell 16bps and 11bps respectively). Looking ahead, we expect fixed income yields to track the trajectory of system liquidity. Currency Market: Naira remains constant in the parallel market In line with its recurrent trend, the naira traded sideways in the parallel market to close the week at N361/$1. Nevertheless, the $50bn outlined earlier in the week. Consequently, NASDAQ (-2.1percent), S&P 500 (-1.4percent) and DJIA (-0.7percent) trended southwards w/w. In Europe, equity indices weathered a volatile week to log back-to-back weekly gains. With the trade tensions between U.S. and China in the background; European Union’s statistics agency, Eurostat, said unemployment in the 19 Eurozone countries fell to 8.5percent in February from 8.6% in January, its lowest level since December 2008. Accordingly, UK’s FTSE (+1.8percent), France’s CAC ((+1.8percent), Germany’s DAX (+1.2percent) and Pan-European STOXX 600 (+1.1percent) indices closed the week higher. Emerging market indices closed the week mixed. India’s BSE (+2percent) and South Africa’s JALSH (+0.7percent) advanced w/w while Brazil’s IBOV (-1.6percent), China’s SCHOMP (-0.9percent) and Russia’s RTSI (-0.8percent) declined w/w. Investor’s Square •Have you been shabbily treated by your registrar, stockbroke r or other capital market operators? Let us know and investor will help you investigate and report back. E-mail: iheanyi.nwachukwu@businessdayonline.com Subscription opens for FGN savings bonds offer …at 10.75%, 11.75% coupon rates IHEANYI NWACHUKWU The Debt Management Office (DMO) on behalf of the Federal Government of Nigeria (FGN) has started offering Savings Bond for this month of April. The subscription for the five-day offer opened on Monday April 9, 2018, with a minimum subscription of N5, 000 and maximum subscription of N50million and closes by 12 noon on Friday April 13, 2018. FGN Savings Bond is a scrip-less security with allotment done electronically into investor’s CSCS account; and investors will receive notifications. The Savings Bond is backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria. Early this year (January 25), the Debt Management Office updated list and contact details of its accredited distribution agents to market FGN Savings Bond. The Agents are currently 135 in number, according to DMO list. The Central Bank of Nigeria is the Registrar and Settlement Agent for FGN Savings Bond; while Central Securities Clearing System Plc (CSCS) plays the Custody, Clearing and Settlement roles. The 2-Year FGN Savings Bond due April 18, 2020 is currently being offered at a coupon rate of 10.75 percent per annum; while the 3-Year FGN Savings Bond due April 18, 2021 is also offered at a coupon rate of 11.75 percent per annum. Coupon will be paid quarterly and bullet principal payment on maturity - directly into investors’ bank account. The coupon rate is the rate of interest paid by the bond issuer (Debt Management Office on behalf of Federal Government of Nigeria) on the bond’s face value. FGN Savings Bond is an investment vehicle offered by the Sovereign that serves to meet the investment needs of low-high income citizens in the economy by enhancing their savings culture while also acting as an efficient debt management tool for the Nigerian Treasury. It is of immense benefit to individual savers, small businesses, co-operatives, foundations, nonprofit organisations, and other investors subject to the maximum limit of N50million. Nigerian Citizens resident abroad and foreigners resident in Nigeria are eligible. Every month, the Federal Government issues Savings Bond to deepen the national savings culture; provide opportunity to all citizens, irrespective of income level to contribute to national development; enable all citizens participate in and benefit from the favourable returns available in the Nigerian Capital Market; and diversify funding sources for the Government.

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