October 7, 2016/Cordros Research
Nigeria Equities Market The Nigerian equities market rebounded from the loss in August, with the benchmark All Share Index posting a monthly gain of 2.67%. Sentiments were mostly driven by positive announcement and reports, as well as upbeat earnings. The gain further supports the view that investors have somewhat priced in the current weakness in the macroeconomic environment into their equities exposure, as the advancement in the NSEASI came amid a host of disappointing economic data (e.g. negative GDP growth, declining capital importation, rising unemployment rate and up trending July inflation) that hit the market in the buildup to September.
The gain (+0.46%) recorded in the first half of the month, in particular, could be attributed to (1) a strong rally in heavyweight DANGCEM following management’s announcement of an upward adjustment in the ex-factory price of its 50kg cement, and an acceleration in the installation of coal mills and mining initiative; and (2) positive reaction to CONOIL’s impressive FY’2015 result, on the back of which the downstream oil major declared a N3.00 dividend.
Gains were consolidated in the second half (+2.20%) of the month amid a mix of profit-taking and bargain hunting – with proceedings ending with a bullish bias. Primarily underpinning the rally was the strong buying momentum in the Oil & Gas sector, driven by the expectation, and the eventual agreement by OPEC members to cut production for the first time in eight years. The OPEC production cut deal, which is seen to have positive impact on oil prices in near term, is coming at a time that militancy activities has reduced in the Niger Delta region and some of Nigeria’s largest oil facilities (hitherto on force majeure) have resumed operation.
The Oil & Gas index (+9.82% m/m) consequently posted the biggest gain in the review period. The strongest rallies were recorded by CONOIL (+75.50%), TOTAL (+22.92%) and SEPLAT (+14.29%). The Consumer Goods index (+5.45% m/m) similarly closed higher, as UNILEVER (+20.51%), CADBURY (+17.79%) and NB (+7.13%) attracted investor interest; while gains in LAWUNION (+37.74%) and CONTINSURE (+6.06%) buoyed the Insurance (+0.23% m/m) index. On the reverse, selloffs in GUARANTY (-9.43%) and UBA (-3.45%), ASHAKACEM (-18.45%) and WAPCO (-5.52%) weighed on the Banking (-2.84% m/m) and Industrial Goods (-0.35% m/m) indices respectively.
