Equity Market Ready for Another Rally in 2018


Wednesday, January 03, 2018 /01:55PM / FSDH Research 

The outlook of the equity market remains positive in 2018 as FSDH Research expects the recovery witnessed in 2017 to continue. The Nigerian Stock Exchange All-Share Index (NSE ASI) closed the year 2017 at 38,243.19 points, representing an appreciation of 42.3%. This is the first year-on-year(y-o-y) appreciation since 2014. 

The NSE Banking and Consumer Goods Indices recorded the highest appreciation in 2017, growing by 73.3% and 37% respectively. The following stocks recorded the highest return in terms of capital appreciation in 2017: Dangote Sugar (227%), International Breweries (195%), Fidelity Bank (193%), Fidson Healthcare (189%) and Dangote Flour Mills (186%). 

The quarterly analysis of the equity market in the last seven years shows that it appreciated consistently in Q2. We attribute the appreciation in Q2 to the release of the Full Year earnings and corporate actions during the period. The equity market dropped in Q1 every year in the last seven years, except in 2013. 

The depreciation in Q1 may reflect the delay in taking investment decisions at the beginning of the year. The following factors drove the performance of the equity market in 2017: the increase in the price of crude oil; introduction of the Investors’ and Exporters’ (I &E) Foreign Exchange window leading to stability in the foreign exchange market; improved corporate earnings and the drop in the yields on the Nigerian Treasury Bills (NTBs). 

FSDH Research expects the factors that drove the equity market in 2017 to support the market rally in 2018. We observed a strong correlation between the historical movements in the NSE ASI and the crude oil price (Bonny Light). The current consensus is that the average price of crude oil will be marginally higher in 2018 than 2017. 

The inflation rate should decline further in 2018, barring adjustments to the pump price of Premium Motor Spirit (PMS) and the electricity tariff. The drop in the yields on fixed income securities should also lead to portfolio realignment towards the equity market. FSDH Research believes the expected drop in the equity market in Q1 2018 is an opportunity for strategic investment in the market ahead of the expected rally in Q2. 

The following sectors should perform well in 2018: Banking; Building Materials; Consumer Goods and Agriculture. 

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2017 Year End Review
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5.      Trading Statistics in 2017 – TRANSCORP, UBA Top Market Volume
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8.      Stocks Off and Near 52-Week Highs and Lows as at 221217
9.      Top 10 Policy Reforms in 2017
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11.  Nigeria's Top Ten News Makers in 2017
12.  Nigeria’s Economic Indicators in 2017
13.  Market Movements in 2017 - Forex Reserves Up by 44.54%
14.  Foreign Portfolio Participation in Equity Trading in 2017
15.  Oil and Gas Sector – SEPLAT, ETERNA Top Gainers as FO Records -47.19% YTD Return
16.  Consumer Goods Sector – GUINNESS Records Over 3,000 PE Ratio
17.  Financial Services Sector – GUARANTY Records 40.52% PAT Margin as NESF Tops on EPS
18.  NSE ASI Performance Review and How Key Sectors Fared in 2017
19.  47 Financial Services Sector Stocks Are Penny Stocks in 2017
20.  Movers and Shakers in 2017 - DANGCEM, GUARANTY Record Growth in MKT CAP as FO, MOBIL Lead Otherwise
21.  DANGSUGAR, MAYBAKER and INTBREW Among Best Performing Stocks in 2017

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