MONTHLY MARKET REVIEW AND Forecast AUGUST 2017

Transcript:MONTHLY MARKET REVIEW AND Forecast AUGUST 2017:
MONTHLY MARKET REVIEW AND Forecast AUGUST 2017 SEPTEMBER 2017 TRUSTFUND PENSIONS PLC RESEARCH MACROS | EQUITIES| BONDS | MONEY MARKET | ALTERNATIVE INVESTMENTS Outline Fixed Income Market Outlook Nigerian Macro Review Equity Market Outlook 2 copyright(c)Trustfund Pensions Plc Trustfund Unit Price – Riding the tide of Bearish Market Market Outlook Snapshot of the Current Economic Environment We expect the MPC to keep the MPR unchanged, hence allowing the CBN to continue with short term administrative measures. Previous threshold sustained on CRR to encourage the DMBs step up credit to the private sector and convey a positive view of the financial system. Inflation rate dropped to 16.01% in August 2017, from 16.05% in July 2017, representing the sixth consecutive month of decline in the headline inflation rate. The value of the Naira strengthened in both the inter-bank and the parallel FX markets on sustained intervention by the CBN. The accretion to the external reserves was boosted by improved oil production and relatively favourable crude oil price. Real investment return remains in the negative even as Aug. inflation rate came lower to 16.01% 3 copyright(c)Trustfund Pensions Plc Source: Trustfund Pensions Plc Research; Bloomberg Naira/USD Exchange Rate Between Jan & Aug 2017 Macroeconomic Environment MPR Inflation Equity Market Round-up Source: Trustfund Pensions Plc Research; NSE 4 copyright(c)Trustfund Pensions Plc The Nigeria equity market has returned 31.71% YTD Equity Market Commentary The Nigerian equity market closed August bearish (-0.95%). Key downsides to stocks performance include: profit taking on large cap counters and relatively high bond yield (16% average). At 31.71%, Year To Date(Ytd) return remained attractive in the month and is expected to sustain the high through the year as confidence further improves in the economy on tapered inflation rate and rising PMI. Equity return in our RSA portfolio remained supportive of the NAV, as it increased further to 38.01% in August from 34.37% returned in July. Hence, we will continue to explore stocks with sound fundamentals and the potential to turn in attractive dividend yield by year end. Broad market P/E and Dividend yield are currently at 11.4x and 4.0%, respectively - indicating attractive upside for long term equity positions. Our top sector picks are Financials (4.1x P/E; 6.4% div yield) Industrial Goods (13.1x P/E; 3.6% div yield) and Conglomerates (8.0x P/E; 5.4% div yield). Monthly Equity Movement Market – Fixed Income; Average long term yield sustained the 16% levels in August Source: