NSE edges higher as consumer stocks rally

The Nigerian Stock Exchange (NSE) All-Share Index ended higher at the close of the mid-week trading session, buoyed by strong gains in the consumer goods sector. Philip Anegbe, a Research Analyst at ARM, provided insights on the market trends and expectations for the trading day in an interview with CNBC Africa. Anegbe highlighted the remarkable 0.50% increase in the NSE All-Share Index on the previous trading day, following a significant 2% surge that was witnessed earlier. He attributed the recent bullish run in the market to increased investor participation and positive earnings reports from companies, signaling optimism among investors. Consumer goods stocks performed well, with notable gains in the sector driven by companies like Dangote Flour Mills and Guinness Nigeria. Dangote Flour Mills announced a rights issue aimed at reducing its high dollar-denominated debt and growing its volumes organically. Meanwhile, Guinness Nigeria expanded its presence in the spirits segment, which offers higher profit margins, leading to increased investor interest. The industrial goods sector also saw a strong rally, particularly in Lafarge Africa, with a 5% surge in its stock price. Anegbe pointed out that the sector's performance was supported by a rebound in energy prices, overcoming previous challenges of high energy costs and currency fluctuations. Overall, the positive developments in various sectors, including the consumer goods space, have driven the market upturn. Anegbe also discussed the challenges faced by some oil companies in the current economic environment, particularly in obtaining foreign exchange for petroleum product importation. This has put pressure on their financial performance, despite improvements in FX liquidity. Looking ahead, Anegbe shared insights on the banking sector, emphasizing the importance of fundamental analysis for investment decisions. He advised investors to consider tier one banking stocks carefully due to issues related to returns and capital adequacy. In contrast, tier two banking stocks may offer long-term value if chosen selectively. Anegbe highlighted Flour Mills as a strong contender in the consumer goods space, citing the company's ability to pass on cost pressures to consumers effectively. He projected a positive trend in the market, driven by companies like Flour Mills and Seplat Petroleum Development Company, which reported strong earnings and expansion plans. Anegbe expressed confidence in the market's potential for growth, expecting continued liquidity inflow from foreign investors to sustain the positive trajectory. Despite potential corrections in certain segments, Anegbe forecasted a positive performance for the market in 2017 and beyond. Regarding the impact of bond investments on banks and the stock market, Anegbe noted that high bond yields would benefit banks due to elevated asset yields. The government's borrowing plans and fiscal deficits indicated a favorable environment for banks, with attractive yields boosting investor confidence. While bond investments may draw some interest from stock market investors, Anegbe remained optimistic about the market's resilience and positive outlook. In conclusion, Anegbe expressed optimism about the market's performance, expecting a continuation of the current positive trend and potential growth in the coming years.