Banks lead as equities extend gains

The Nigerian Stock Exchange extended its bullish streak for a second consecutive session, led by gains in the banking sector. Ayodele Akinwunmi, Head of Research at FSDH Merchant Bank, shared insights on the market's performance and expectations for the upcoming earnings season. Akinwunmi expressed optimism that the current rally is likely to continue as companies prepare to release their 2017 financial results, with expectations of better performance compared to the previous year. Looking ahead, Akinwunmi highlighted the impact of the foreign exchange market's increased liquidity in 2017, following the introduction of the Investors and Exporters window. The improved access to foreign exchange contributed to a more favorable operating environment for businesses, leading to better financial outcomes. Furthermore, the decline in inflation rates from February to December 2017 also bodes well for corporate earnings, with projections of lower inflation rates for the current year. However, Akinwunmi cautioned against potential risks, including security challenges and food inflation. He emphasized the need for the government to address food security issues promptly to avoid adverse effects on inflation and economic stability. Additionally, the possible adjustment to petrol prices could impact inflation rates, but Akinwunmi remained optimistic about the overall economic outlook. In response to concerns about food supply disruptions and their impact on food-related stocks on the exchange, Akinwunmi noted that companies have been diversifying their sources of raw materials to mitigate risks. While the food security situation remains a concern, Akinwunmi highlighted the resilience of companies in adapting to alternative sourcing strategies. As the Nigerian Stock Exchange continues to show positive momentum, investors are closely monitoring the upcoming earnings season for signals of corporate performance and market trends. With expectations of improved results and a favorable economic environment, the outlook for the equities market remains positive, pending successful resolution of key challenges.