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Q1’18: Despite setbacks, equities did not disappoint – Foresight Securities

Charles Fakrogha, a stockbroker and Chief Relationship Officer with Foresight Securities & Investment, spoke on the performance of the equities market in the first quarter, Q1, 2018.

By Nkiruka Nnorom

HOW will you rate activity in the stock market in the last quarter?

The quarter started in a positive note, which is a fall-out from 2017. In January, we saw a lot of activities in the market; we saw so much returns. Of course, at a point, the Nigerian equities market was adjudged one of the best performing in the world and that tempo was due to the positive ratings by some international rating agencies and that tempo continued for quite some time. It was also sustained as a result of the earning reports of the companies that hit the market.

However, towards the end of February and March, we saw a reverse of the situation. We saw the market in a bear run as a result of some factors. For instance, we saw the likes of Japaul Oil and Maritime Services and Unity Bank Plc in terms of Milost equity investment and the controversy surrounding the investment. So, the market continued the bearish trait. However, in the last week of the quarter, the market closed in a positive note.

•Charles Fakrogha, Chief Relation Officer, Foresight Securities

Overall, I will say the first quarter has done well; activity has been very good. The market does not operate in isolation; it reflects the larger economy. What you see in the market is basically a reflection of happening in the Nigeria economy. We must also congratulate managers of companies. Despite the harsh operating environment, we saw that the results they sent to the market was quite encouraging. So, I will say that first quarter was quite eventful.

Looking at the market from policies emanating from the macro-economy, are there policy decisions you think that either negated or helped the market in the quarter?

Yes, a lot of them. Number one is the Economic Recovery and Growth Plan; they intensified effort in that direction. The government showed us so many things they are doing in terms of infrastructure among others. Some are fallout from 2017, which dovetailed into first quarter of 2018. However, there was negative security situation and the government did not help matter at all. If the government had come out with a clear policy on how to handle the security situation, of course, the economy and in extension, the equities market would have done better. There was no clear policy on how to deal with herdsmen and farmers’ clashes and that scared investors.

How did the failure of MPC to sit within the quarter impact on activity in the market?

The market saw that the committee could not sit because it was not been duly cleared by the National Assembly so the market reacted by just being neutral in terms of going up or coming down. So, in terms of them not meeting for the first quarter, it did not actually have any impact whether negative or positive in the market.

During the quarter, the industrial goods and the banking sector outperformed the All Share index. What would you attribute the performance of both sectors to?

You already know that in Nigerian economy or in any economy, the financial services sector is very key because if that sector sneezes, other sectors catch cold. The banking sector did very well as a result of the regulators – the Securities and Exchange Commission, SEC, and the Central Bank of Nigeria, CBN, -ensuring that the institutions play by the rule. We saw how the regulators stepped in with the payment of dividend for the banks in relation to the percentage of their non-performing loans. So, you can see that this made most of these banks to really do what they are expected to do and we saw their numbers.

So, this made their share prices to continue to go up. And of course, there was a lot of expectations based on their 2017 third quarter report. The expectations was that if the banks had done well in the third quarter, the difference in the last quarter will not be much. So, there was a lot expectations, especially for GT Bank, Zenith Bank and others tier one banks in term of what they were going to give to their shareholders. Based on this expectation, we saw their share prices going up and I can tell you, most of these banks did not really disappoint their shareholders in terms of dividend payment.

Dividend payment

Coming to the industrial goods sector, of course, the government of the day has always been insisting on industrialization and manufacturing. They have done a lot in terms of encouraging manufacturers. Whether this encouragement was in terms of tax holiday in the manufacturing sector, we saw it.

We even saw the government rejecting some trade agreements in Africa because the manufacturers were kicking against it. So, you can see that the government was really listening to the industrial goods sector and that is why you saw that a lot of the companies did well in terms of their performance when you talk about the likes of Dangote Cement.

So, due to government interest in the sector, that is why it can outperform the All Share Index.

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