Nigerian Bourse Rebounds as Downstream Oil Counters Rally

The Nigerian equities market halted a two day losing streak as the All Share Index rose 0.9% to close at 25,865.06 points at the end of Thursday’s trading session. Market capitalization also advanced N80.7bn to settle at N8.9tn. Today’s performance was buoyed by the gains in bellwether counters – NIGERIAN BREWERIES (+2.5%), FORTE OIL (+5.0%) and ZENITH (+1.5%) which counterpoised the impact of the decline in NESTLE (-1.5%), UNILEVER (-3.3%) and WAPCO (-1.5%) on the ASI. However similar to yesterday, market activity was mixed as volume traded rose 32.1% while value traded declined 6.8% to close at 261.5m units and N1.5bn respectively.
Oil & Gas index gains 3.7% as Sector Bellwethers Rally 
The Oil & Gas index rose 3.7% as a result of appreciation in downstream oil marketers - FORTE OIL (+5.0%), TOTAL (+6.1%), OANDO (+5.0%) and MOBIL (+3.6%) - on the back of the announcement by the Federal Government to remove fuel subsidy and partially deregulate the petroleum sector. The Banking index also grew 1.4% against the backdrop of sustained uptrend in ZENITH (+1.5%), ACCESS (+3.5%), GUARANTY (+0.8%) and DIAMOND (+8.9%) whilst the Insurance index gained 1.0% as bargain hunting in MANSARD (+5.0%) continued.  The performance of NIGERIAN BREWERIES (+2.5%), PZ (+4.8%), TIGER BRAND (+10.1%) drove the Consumer Goods index (+1.4%) into the green zone. On the other hand, sustained investor apathy towards WAPCO (-1.5%) pulled the Industrial Goods index southward -0.5% to emerge as the lone declining index for the 2nd trading session in a row.
Search for Value Fueling Mid and Small Caps Rise
Investor sentiment has remained very bullish since the start of the week with Market breadth (advancers’/decliners’ ratio) closing at 3.4x today on the back of 37 advancing stocks against 11 declining stocks. TIGERBRAND (+10.1%), LIVESTOCK (+9.5%) and DIAMOND (+8.9%) sat comfortably at the top of the gainers' list while FLOURMILL (-5.0%), UPL (-4.9%) and UNILEVER (-3.3%) topped the losers' list. We note the renewed positive sentiment in equities as an indication that market is slowly switching from risk-off investing, which dominated activities in Q1:2016, to a subtle risk-on mood which has fueled the two week long search for value and rise in the small-mid caps. Whilst we remain encouraged by government reforms and somewhat perceive the market with potentials for higher upside, we advise investors to balance optimism with caution and stick to a value-investing strategy to hedge against potential downside risks of flattish/weak earnings in Q2:2016.