Wednesday, April 04, 2018 /08:13 AM/GTI
At last, the MPC will now hold her first meeting of the year this week, starting from Tuesday, April 3rd to Wednesday, April 4th. This is coming after four months of inactivity as a result of failure to form a quorum in the heart of executive and legislative government face-off.
The prolong period of inactivity means the economy was left on an auto-pilot. Regrettably, decisions which were expected to have stirred economic activities were sacrificed at the altar of politics. Disappointingly, the parties involved appeared not to have been deterred by their action.
Kindly note that the MPC by the CBN’s statute that set it up is expected to have her meeting once in every two months. At this meeting, global and domestic issues that bothers on the economy environment are expected to be deliberated on and decisions are taken thereafter.
Thank goodness that the impasse appeared to have been over. As the MPC conveys for this meeting, so much is at stake. The MPC will be faced with the choice of either taking a decision to cut the MPR at current rate of 14% or retain it. The decision to cut the MPR would mean to incentivize the investment environment and this is expected to have a direct impact on productivity, at least, in the short to medium term. It equally means a tendency for an increase in system liquidity which can fuel inflationary trend, thereby altering the CBN’s existing war on it.
Based on the above scenarios, we are of the view that the MPC would likely hold status quo now and hope to tweak the MPR in May’s meeting. Our opinion is based on the fact that the new members of the MPC would appreciate time for proper understanding of the system and procedural trend. We are equally of the opinion that the MPC would want to continue with a trend that has helped her in fighting inflationary pressures in the system over the past months.
Market review for the month ended March 29th, 2018
The Nigerian equity market in the month of March closed in the south and in the process extended bearish run to two weeks in a row. The market has found itself in the bear dominated territory despite the positive corporate earnings that were reported in the Month.
Corporate earnings appeared to have been priced into the market bearing in mind the earlier price upward rally at the beginning of the year. Note that activity was mixed with strong intra-day’s volatility all through the month.
Month-on-month (m/m), the All-Share Index (ASI) shed a total of 1,826.03 absolute points, representing a decline of 4.21% to close at 41,504.50 points. The year-to-date’s (Ytd) return now stands at +8.53%.
A turnover of 10.17 billion units of shares, valued at N136.241 billion in 103,441 deals, representing 14.88% drop and 28.49% rise from the 11.94 billion volume and N106.03 billion value respectively exchange in the month of February in 112,118 deals.
Twenty-five (25) equities appreciated in price during the month, lower than forty-five (35) of the previous month. Sixty (60) equities depreciated in price, higher than forty (40) equities of the previous month, while eighty-six (86) equities remained unchanged lower than eighty-seven (87) equities recorded in February.
Outlook for the month of April 2018
The positive economic environment is expected to dictate major activities in the month of April. We expect to see a lower reading for March Inflation, an improved 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. By and large, we expect a positive market bearing in the month.
In the meantime, we strongly advise investors to take a keen interest on firms’ fundamentals before taking an investment position on such firms. We equally advise on taking a mediumlong term view of the market.
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Our Watch List
In the meantime, the following stocks listed below falls into our watch list this week.
Access Bank, Dangote Cement, Honeywell Flour, Fidelity Bank and PZ Cussons.