2018 started out on a bullish note, extending the prior year’s bullish sentiments amid optimism in the broader economy and strong FY-17 earnings expectation. The NSEASI recorded a massive 16.0% return in Jan-18 alone but corrected 2.3%m/m and 4.2%m/m in Feb-18 and Mar-18 notwithstanding the sustained improvement in the broader economy. The FY-17 corporate scorecards also impressed. Overall, the NSEASI rallied 8.5%q/q in Q1-18, spurred by the January rally.
As we move further into the year, investors are beginning to wonder if there is any room for upside in Q2-18 given volatilities in the global markets. We believe there is still room for further upside given that the benchmark index currently trades below our base case return of 12.4% for the year. Sentiments will be largely driven by H1-18 earnings scorecards, continued improvement in the broader economy and a lower yield environment.
Although, rising external reserves ($46.3bn) and oil prices ($68.5/b) support a stable outlook for FX rate, elevated equity valuation and an earlier than expected political uncertainty may cap further uptrend. Nevertheless, primary market issuances, especially the proposed MTN listing (expected to add up to N1.7tn {$5.6bn} to market capitalization) should boost momentum, going into the rest of the year.
