REGENCY RESEARCH WEEKLY MARKET REPORT MACROECONOMIC ENVIRONMENT MACROECONOMIC INDICATORS ALL SHARE INDEX & MKT. CAP. Monday April 02, 2018

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1 Monday April 02, 2018 REGENCY RESEARCH WEEKLY MARKET REPORT MACROECONOMIC ENVIRONMENT The Role of the Capital Market in the Economy Economic growth in a modern economy hinges on an efficient and effective financial sector that pools domestic savings and mobilizes capital for productive projects. Absence of effective capital market could leave most productive projects which carry developmental agenda unexploited. Capital market connects the monetary sector with the real sector and therefore facilitates growth in the real sector and economic development. The capital market fulfills the transfer function of current purchasing power, in monetary form, from companies which have a surplus of funds to those which have a deficit, in exchange for reimbursing a greater purchasing power in the future; in this way the capital market makes possible to separate the saving act from the investment one. Capital market has played major roles during the privatization of public owned enterprises. For example, Nigeria s capital market was instrumental to the initial twenty five Banks that were able to meet the minimum capital requirement of N25 billion during the banking sector consolidation in The stock market has helped government and corporate entities to raise long term capital for financing new projects, and expanding and modernizing industrial/commercial concerns Capital market increases the proportion of long-term savings (pensions,.) that is channeled to long-term investment. Capital market enables contractual savings industry (pension and provident funds, insurance companies, medical aid schemes, collective investment schemes, etc.) to mobilize long-term savings from small individual household and channel them into long-term investments. The implication will be an increase in productivity within the economy leading to more employment, increase in aggregate consumption and hence growth and development. It also helps in diffusing stresses on the banking system by matching long-term investments with long-term capital. It encourages broader ownership of productive assets by small savers. It enables them to benefit from economic growth and wealth distribution, and provides avenues for investment opportunities that encourage a thrift culture critical in increasing domestic savings and investment ratios that are essential for rapid industrialization. Capital market also provides equity capital and infrastructure development capital that has strong socio-economic benefits through development of roads, water and sewer systems, housing, energy, telecommunications, public transport, etc. Moreover, capital market promotes public-private sector partnerships to encourage participation of private sector in productive investments. The need to shift economic development from public to private sector to enhance economic productivity has become inevitable as resources continue to diminish. It assists the public sector to close resource gap, and complement its effort in financing essential socio-economic development, through raising long-term project based capital. It also attracts foreign portfolio investors who are critical in supplementing the domestic savings levels. It facilitates inflows of foreign financial resources into the domestic economy. Recent empirical research linking capital market development and economic growth suggests that capital market enhances economic growth and development. Countries with well-developed capital markets experience higher economic growth than countries without. The role of capital markets are vital for inclusive growth in terms of wealth distribution and making capital safer for investors. Capital markets can create greater financial inclusion by introducing new products and services tailored to suit investors preference for risk and return as well as borrowers project needs and risk appetite. Innovation, credit counseling, financial education and proper segment identification constitute the possible strategies to achieve this. A welldeveloped capital market creates a sustainable low-cost distribution mechanism for multiple financial products and services across the country. Capital market enhances efficient financial intermediation. It increases mobilization of savings and therefore improves efficiency and volume of investments, economic growth and development Capital Market Summary. Analysis of the market activity in the week ended March 23, 2018 technically reveal pessimistic trading pattern as investors continued to display profit taking in major sectors during the week. The Nigerian Stock Market thereby closed on a negative note with All Share Index and Market Capitalization of listed equities depreciating by 1.11% and 0.14% from the opening figures of 41, and N15,002 trillion to close at 41, and N14,982 trillion respectively. Its year to date (YTD) return stands at +8.44%. MACROECONOMIC INDICATORS GDP Growth Rate 1.40% December 29., 2017 Un-employment Rate 18.80% December 29, 2017 Broad Money Supply (M2) N21,975 Trn December 29, 2017 Money Supply (M1) N10,849Trn December 29, 2017 Consumer Price Index (YOY) 14.33% February 28,2018 Monetary Policy Rate (MPR) 14% November 30, 2017 Cash Reserve Ratio (CRR) 22.50% November 30.,2017 Nigeria s Bonny Light Crude Oil US$69.10 March 30, 2018 Nigeria s Gross External Reserves Source: Central Bank of Nigeria (CBN) ALL SHARE INDEX & MKT. CAP PERFORMANCE OF THE NSE INDICES NSE INDICATORS US$42.49Bn March 09, 2018 INDEX TITLE prev week curr week CHANGE % NSE PREMIUM 2, , NSE MAIN BOARD 1, , (0.59) NSE 30 INDEX 1, , NSE CONS. GOOD NSE BANKING (3.09) NSE INSURANCE (1.18) NSE OIL & Gas (3.75) NSE LOTUS 2, , NSE IND. GOODS 2, , (3.98) NSE ASeM 1, (1.82) NSE PENSION 1, , NSE CG INDEX 1, , (0.49) Regency Research Weekly Market Report Committed to grow your wealth 1

2 Domestic Market Review Forty stocks appreciated in price during the week, as against thirty three stocks in the preceding week. The top ten price gainers during the week were: MARKET SUMMARY Curr. Week Previous % Change week Volume 1,541M 2,328M Value N= N=16,647 B N=28,927 B Total Gain Forty stocks depreciated in price during the week as against forty nine stocks in the preceding week. The top ten price losers during the week were: Total Loss Deals 18,805 25, All Share Index 41, , Market Cap. N=14,993 N=14, EXCHANGE TRADED PRODUCTS (ETP Trillion TOP TEN GAINERS Trillion A total of 15,293 units of Exchange Traded Products valued at N254, in 16deals were traded during the week compared with 4,165 units of Exchange Traded Products valued at N78, in 15 deals traded in the previous week. Company Op.Price cl. Price Gain Gain in % GLAXO WEMA CUSTODIAN UNITYKAP ETERNA ABCTRANS LAWUNION CAVERTON PZ STANBIC TOP TEN LOSERS BOND MARKET A total of 21,583 units of FGN Bond valued at N22,867, in 16 deals were traded during the week compared with 5,152 units of FGN Bond valued at N4,561, in 24 deals executed in the previous auction. Company Op.Price Cl. Price Loss Loss in % JAPAUL (0.10) (14.49) DIAMOND (0.29) (13.49) CHAMPION (0.31) (11.44) JAIZ (0.40) (43.96) MUTUAL BE (0.04) (10.53) AIICO (0.07) (10.14) CILEASING (0.18) (9.47) WAPCO (4.70) (9.40) FTNCOCOA (0.02) (9.09) LASACO (0.03) (8.33) Regency Research Weekly Market Report 2 Committed to grow your wealth

3 Domestic Market Review OUTLOOK AND STOCK RECOMMENDATION FOR THE WEEK 02/04/18-06/04/2018) RECOMMENDED STOCKS TO BUY The Nigerian Stock Market appreciated slightly during the week under review as investors displayed active trading in some stocks across the sectors. We expect more active trading and bargain hunting to continue in the coming week as most companies are releasing their 2017 year end results. We therefore consider the underlisted stocks good for investment during the week. DANSUGAR, NASCON, FIDELITY, WAPCO, UCAP, UBA and FLOUR MILLS prices are attractive. The fundamentals are strong and they have good ROI. The stock prices are low and attractive due to profit taking experienced recently. The stocks are also recommended because of their good dividend pay out rate. We expect the prices to enjoy upward trend as we expect more full year financial results. Stocks Current Price Expected Target price DANSUGAR NASCON FIDELITY FLOUR MILS WAPCO UCAP UBA TRANSCORP PLC Expected % Change TRANSCORP PLC, currently is a good stock for speculative investment due to good current price and expectation of good end of year final result. FINANCIAL HIGHLIGHTS OF RECOMMENDED STOCKS Company Result Turnover PAT Current Last yr Current N=bill N=bil NB PLC FULL YEAR RESULT 31/12/ N4.13 FLOUR MILLS 3rd qter N=bill Last yr N=bil Curr EPS Last Div. Paid N3.13 Final dividend in 2017 FY PLC 31/12/ N4.56 N=1.00 in 2017 FY FIDELITY BANK 3rd Qter 30/9/ N0.67 N0.14 in 2016 FY ZENITH BANK Full year N2.70 final dividend 31/12/ N5.66 in 2017 FY DANGOTE 3rd qter FLOUR PLC 30/09/ N2.55 Nnill FBNH PLC 3rd qter 30/09/ N1.22 N FY 3

4 MARKET DEVELOPMENTS (LAST WEEK ) MAN seeks reversal of alcohol, tobacco excise duty hike. The Manufacturers Association of Nigeria has called on the Federal Government to forget the proposed hike in the excise duty on alcohol and tobacco products, saying if it goes ahead to implement the proposa l, the firms producing the products will shut down and increase job losses.the President, MAN, Dr. Frank Jacobs, made the call in Lagos on Wednesday while addressing journalists on the association s position on the African Continental Free Trade agreement. Citing the need to raise revenue, the Federal government had on March 11 approved an amendment to the excise tariff rates for alcoholic beverages and tobacco products, which will come into effect on June 4, The Minister of Finance, Mrs. Kemi Adeosun, had stated that President Muhammadu Buhari had granted a grace period of 90 days to manufacturers of the affected products before the new duty regime would go into effect. She said the new excise duty rates would be spread over a three -year period from 2018 to 2020 in order to moderate the impact on the prices of the products. The minister explained that the new tariff regime came about following an all -inclusive meeting between the Tariff Technical Committee of the Federal Ministry of Finance and key industry stakeholders. Jacobs, however, said that t he association was still engaging the government on the issue. He stated, During the last presidential engagement forum, I talked abou t the impact of this excise duty increase on the manufacturing sector. I made it clear that if they go ahead and implement that policy, within the three years when that policy will be in full force, many of the companies that are involved in those products will close shops. INVESTMENT BASICS Introduction Investment decisions are largely dictated by the macro-economic environment and the response by both fiscal and monetary policy. In most circumstances investors tweak their decisions to accommodate the duo of macro economic climate and policy response, in order to maximize returns. Certainly, the question of where to put money is influenced by understanding timing. Timing in context refers to the health of the cycle and its relationship with the risk. Simply capturing the state of the macro-economic environment helps in identifying booby traps either asymmetric or systemic risk. The internal dynamics provides the needed caption of both policy response and risk Taking into consideration the current macro environment fused with both monetary and fiscal policies, where should I put my money? Equity:. Shares(equities) are negotiable instruments issued by a corporation that represent a capital share of that corporation. By investing in shares of listed companies on the NSE you become part owner of these listed companies and thus can benefit from share price growth and/or income paid as dividends. Ownership interest depends on the number of shares held by an investor relative to the company s outstanding shares and class of shares held. An investor can trade shares by using a licensed stockbroker to buy and sell shares on his/her behalf or remotely through direct market access. The Nigerian Equities Market has been experiencing bullish run in recent times due to continued growth in the economy, growth in Agriculture, oil production and prices, Stability of the Exchange rate and increase in foreign and local Portfolio Investors participation in the stock market amongst others. Also the introduction of the Nigerian import and export window has triggered a bullish run in the equities market. One must admit that prices of equity had sustained heavy bleeding in the past, which led to valuation hitting the floor. In other words, small entries in absolute term in the market will end up triggering substantial change. Earlier mentioned, equities are vulnerable to wolf packs intrusion that drive prices of stocks appreciation. At the same time equities are leading indicators, which tend to reflect an uptick in momentum, especially when quantitative variables begin to swell. Regardless they still remain a cautious investment space given the present fragile macro climate and the volatile nature inherent. Deposit Rate; This is the interest rate paid by deposit money banks for holding accounts in the bank. They are relatively low risk and in return accompanied with low return. They are considered to be held by conservative investors which are not risk seeking. Such financial investment is done out of capital safety rather than yield. It also underlines the reality of a limited possibility of hitting a positive real saving rate without reaching macro fragmentation. Government Securities:. Government securities are largely referred to as risk free, which makes it a safe haven. Fiscal authorities are running an expansionary budget and a chunk will be sourced out from the money market. Therefore, the status of Government securities as a top layer gold investment is further boosted, given its ability to be both a safe haven and provide high yield; who says you can t eat your cake and have it? Try gilt edge in a fragile cycle coupled with a dominating fiscal conduit. The return on Government securities at this particular point of the cycle make it the preferred financial asset of most investors. Moreover the ability to lock into government securities over a short period, whereby allowing investors to retain liquidity and still take advantage of high yielding instruments makes treasury bills the most sought after among all other government securities at this point. 4

5 FIXED INCOME MARKET REPORT Money Market At the end of the week ended March 30, 2017 the Nigerian Interbank Offer Rates (NIBOR) closed positive for most of the tenors. The NIBOR rate appreciated by 1.42%, 6.20-% and 3.43% for overnight, 1 & 3 months tenors to close at 8.95, & respectively. The NIBOR rate also depreciated by 2.82% for 6months tenors only to close at Treasury Bills The Central Bank of Nigeria during the week under review sold N5.40 billion 91-day treasury bill at 11.95%, N8.39 billion 182-day treasury bills at 13% and N40.18 billion 364-day treasury bills at 13.15% compared with N6.22 billion 91-day treasury bills at 11.75%, N4.02 billion 182-day treasury bills at 13% and N85.50billion 182-day treasury bills at 13.19% sold in the previous week. Foreign Currency (EXCHANGE RATE). The official dollar rate closed at N to a Dollar during the week under review. The naira during the week appreciated against some major currencies. It appreciated by 0.36%, 0.25% and 0.98%, against Pounds Sterling, Euro, and Swiss Franc to close at N430.23, N376.56, and N respectively. OIL PRICE The Nigeria s oil price appreciated during the week under review. According to the latest data given by the Central Bank of Nigeria, the oil price went up and closed at $69.10 compared with $65.71 recorded in the previous week. NIGERIAN INTER BANK OFFER RATE NIBOR TENOR Curr. Rate Prev.Rate % Change Overnight Month Months Months Source: Financial Markets Dealers Quotations (FMDQ) NAIRA EXCHANGE RATES Currency Cur. Rate Prev. Rate Change% US$ (0.02) POUNDS (0.36) EURO (0.25) FRANC (0.98) YEN (1.33) CFA WAUA YUAN RAND (1.03) DANISH (0.31) SDR Source: Central Bank of Nigeria (CBN) MONEY MARKET RATES This Week (%) Last Week (%) Open-Buy-Back (OBB) Overnight (O/N) Source: Financial Markets Dealers Quotations (FMDQ) % Change % % Disclaimer This report was prepared, issued and approved by Regency Assets Management Limited (RAML). The report is based on information from various sources that we believe are reliable. While due care has been taken in preparing it, investors are reminded that the stock prices fluctuate based on stock market forces. This report is provided solely for the information of clients of RAML who are expected to make their own investment decisions. Regency Assets Management Limited accepts neither responsibility nor liability whatsoever for any loss arising from the use of this report. All opinions on this report constitute the authors best estimate judgement as of this date and are subject to change without notice This report is for private circulation only. The report may not be reproduced distributed or published by any recipient for any 5