October 9, 2018/Cordros Report
- Looking through historical data on monthly equities market performance, we find that October and November are sell-off months, while December typically delivers positive return (see Figure 2). As we head for Q4-18, will the trend continue, and even when it does, is it likely that monthly sell-offs would be as heavy as in the recent past quarters (see Figure 3)?
- October appears to be showing its true colour, with month-to-date equities loss currently c.1%, following an all-red session in the first trading week. While it might be too early, we expect the month, and even November, will probably close in red.
- That said, we expect the losses in October and November will trail the monthly average of 5% experienced in Q3. Historical average losses in both months range between 0.01-2.6% and 2.1-2.9% respectively (see Figure 2).
- Despite the local and external risks highlighted above, Nigeria’s strong FX reserves (we estimate at 17 months import cover), with rising oil prices and production, including supporting statements from the CBN on keeping the naira stable, suggest that any further – heavy – FPI sell-offs going forward may be unwarranted.
- Agreed, earnings growth have been weak, but they have been out-ran by prices. And across our universe, both we and consensus have fairly positive view of earnings going into 2019F.
EARNINGS INSIGHT
July-September earnings are mostly unaudited and are likely to be released this month (see indicative result release calendar on Figure 5).