Weekly Market Report –Week Ended Jan. 15, 2016

The Nigeria equities market was on a panic sell-off mode this week as investors dumped shares on account of the continuous slide in crude oil prices which heightened investors' apprehension on the macroeconomic fundamentals, operating environment and financial performance of companies. Consequently, many investors rushed for the exit in a herd pattern with most blue-chip tickers with significant portfolio exposures sold off at record low prices. The market closed sharply negative on all the trading days, bringing W-o-W and YTD decline of the benchmark All Share Index (ASI) to13.0% and 18.0% as the index closed at 23,514.04pts. The highest declines were recorded on Wednesday (-3.6%) and Thursday (-3.4%), while it was down by 3.0% on the last trading day of the week.

Expectedly, activity level spiked due to the heavy selling pressure as average volume and value traded advanced 62.5% and 84.7% W-o-W to 291.9m units and N2.8bn respectively. Banking and Consumer Goods indices topped the activity charts with GUARANTY (34.2%), ZENITH (16.0%) and NIGERIAN BREWERIES (11.5%) accounting for 61.7% of the total value of stocks traded this week. All sector indices closed in the red with the Banking index recording the highest loss, down 18.7%, as investors sold off on Tier-1 bank stocks -- GUARANTY (-25.6%), ZENITH (-29.6%), UBA (-17.2%) and ACCESS (-17.7%). Industrial Goods index trailed with a 16.0% decline consequent on the rout in highly capitalized cement companies -- DANGOTE CEMENT (-16.9%) and WAPCO (-17.4%). The Consumer Goods index also declined 9.1%, pressured by the sustained sell-offs in NIGERIAN BREWERIES (-14.3%). The Oil & Gas and Insurance indices fell 4.9% and 4.2% respectively.

Market sentiment measured by the advancers/decliners ratio collapsed to 0.1x from 0.4x the previous week as only 5 stocks advanced while 55 declined. The gainers were ASHAKACEM (+10.4%), CUSTODYINS (+4.7%), LEARNAFRICA (+3.8%), AGLEVENT (+3.4%) and TOTAL (+1.0%) while UNITYBNK (-33.3%), OANDO (-32.3%), ZENITHBANK (-30.0%), TRANSCORP (-29.0%) and GUARANTY (-25.6%) led laggards.

Given the negative sentiment, we do not believe the market has reached the bottom of the free fall yet (perhaps at 20,000.00pts), as offers on the average still outweighed bids for most blue-chip stocks at market close on Friday. While we perceive the sell-offs as currently overdone, we do not see a short term rebound as most of the debilitating factors are still evident. We would rather suggests investors with a long investment horizon (+2 year) to take advantage of some of the opportunities in high dividend paying industrial and banking (Tier-1) stocks while hedging their exposures with an overweight exposure to fixed income securities and urge short term investors who are risk averse to play more in the fixed income market.