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Industrial goods sector to benefit from increased CAPEX

By Nkiruka Nnorom

AGAINST the bear run that ruled the stock market last week and saw all the sectors close in the red, investment bankers and stockbrokers have said that the industrial goods sector will benefit immensely from the proposed N2.4 trillion capital expenditure in the 2018 budget.

Consequently, they opined that the sector’s performance this year will be better compared to 2017. They added that investors would be positioning to take advantage of low prices in the equities market this week ahead of the earning season.

On the performance of the industrial sectors, analysts at Cordros Capital said: “In 2017, growth in the industrial goods sector remained downbeat despite marked improvement in factors like energy shortages and foreign exchange illiquidity that impeded growth in the previous year. The slow growth in the sector can be attributed to low government spending in the real sector and a delay in the 2017 budget approval.

“Looking ahead, we expect the sector’s performance to be better than 2017 as the proposed budget for 2018 contains another record capital expenditure, CapEx estimate of N2.4 trillion”.

They noted that expected resurgence in consumer demand, as well as individual home owners discretionary spending is more likely to open up new grounds for construction activities will all combine to aid growth in the sector this year.

Meanwhile, a review of activity in the stock market last week showed that transaction closed in the negative territory for a second week in a row with investors losing N175 billion.

At the end of the week’s trading, equities capitalisation dropped to N15.302 trillion from N15.477 trillion, representing 1.13 percent decrease.

Also, the All Share Index, ASI, depreciated by 1.13 percent to 42,638.83 points from 43,127.92 points in the previous week.

Performance across sectors was largely bearish as all sectors declined. The insurance sector depreciated the most, losing 1.7 percent on the back of losses in Consolidated Hallmark Insurance Plc, which went down by 22.9 percent and Prestige Assurance Plc that depreciated by 14.3 percent.

The industrial goods sector, followed closely, falling by 1.1 percent as a result of 9.3 percent losses inChemical and Allied Products Plc and 2.5 percent decline in Dangote Cement Plc.

The consumer goods sector declined by 0.9 percent on sustained profit taking in Guinness Nigeria Plc and Nigerian Breweries Plc. The banking and oil & gas sectors went down by 0.6 percent and 1.0 percent following price depreciation in Union Bank of Nigeria, Diamond Bank Plc, Forte Oil Plc and Total Nigeria Plc, which fell by 9.1 percent, 5.8 percent, 6.6 percent and 0.4 percent respectively.

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