The local bourse closed Dec-18 in the green territory (+1.8%), representing its third monthly gain in 2018 – after Jun-18 (+0.5%) and Jan-18 (+16.0%). However, the gains that were recorded could not avert a negative close to the year (-17.8% YTD return) that can be attributed to broader EM sell-off, US policy normalization, higher US Treasury yields, sluggish domestic economic recovery and the overhang of political jitters that weighed on sentiments in 2018.
A sectoral glance at the year’s performance underscored underwhelming performances across sectors. The Industrial Goods (-37.3%), Consumer Goods (-23.3%) and Banking (-16.1%) indices bore the brunt of the year’s sell-off as selling interests in WAPCO (-72.3%), DANGCEM (-17.5%), NB (-36.6%), DANGSUGAR (-23.8%), FLOURMIL (-20.3%), ACCESS (-34.9%) and UBA (-25.8%), among others, outpaced gains recorded in CCNN (+104.2%), BETAGLASS (+33.1%) and DIAMOND (+45.3%).
Notably, idiosyncratic factors exacerbated the bearish theme in some stock performances. These ranged from the stifling operating environment of sugar refiners
and flour millers to the intense competition in the breweries space and company-specific bottleneck (for WAPCO), not to mention a windfall from the announced merger between DIAMOND and ACCESS. The Oil & Gas (-8.6%) and Insurance (-9.2%) sector indices emerged as the more resilient sectors; possibly precipitated by the initial surge in oil prices and the belayed news of a possible reconsolidation in the insurance sector in the past year. As such SEPLAT (+0.2%), ETERNA (+15.8%) and AIICO (+21.2%) closed the year in green territory.
In the year ahead, we expect a subdued performance in the earlier part of the year (pre-election period) and depending on the outcome of the election and smoothness of transition period, we expect a postelection equity recovery.