MARKET UPDATE 32

NSE PULLBACK OFFERS OPPORTUNITY FOR NEW ENTRANCE 

The recent pullback of the Nigeria equity market was attributed to factors that include reactions to the list of President Muhammadu Buhari's ministerial nominees, expulsion of the Federal Government bonds again from Barclay Bank's index, due to the seeming lack of a defined direction for the economy and an unstable currency management. 

Also, the downward trend was sustained as a result of profit taking that kept the market in red for four straight trading days of the week before trying a rebound last Friday, after a positive outing for five weeks. 

The global equities market's seeming  rebound was due to the  rise in commodities prices  as energy and mining  stocks climbed higher, touching and crossing its 50-day moving average. The dwindling growth rate of the major economies of the worldneed to be addressed as it had started affecting  the emerging economy which if not handled with speed may compress  global economic and financial markets as discussed in the just concluded  World Bank/International Monetary Fund Annual Meetings in Lima, Peru.

The market closedmarginally positive last Friday, but the Composite 

NSEASI still recorded a lossof 1.40 per cent to close at 30,165.22 from an opening figure of 30,588.41 basis points, a difference of 423.19 points, bringing the year-to-date negative return to 12.96 per cent. Market Capitalisation also closed last week at N10.40 trillion from an opening value of N10.73 trillion recorded in the previous week. In the same vain, all the sectorial indices for the period closed negative with the NSE Oil/Gas sectoral index leading after shedding 3.22 per cent. 

On the big board, the decliners outpaced advancers by 48 to 23 and this reflected the negative performance recorded in four trading sessions of the week, making market breadth negative on the back of a declining volume.

NSEASI WEEKLY CHART

The weekly chart revealed a downward trend as the market remained bearish, break-out in the previous was short-lived, as traders and investor sentiments changed as bears dominated trades on reducing volume of transactions. This is an indication that many market players were on the sideline. Positioning at this point in some sectors with focus on the leaders in that industry with strong performance to support price and dividend. This low volume on decline indicate accumulation stage for smart money. Also, note that the market is below its 50-Day moving average on a weekly run. 

NSEASI Daily Chart

On the daily chart, the NSE ASI is marginally below the 50-day moving average as profit taking persisted due to lack of positive catalyst to reverse the trend. Any break down below the green line which is the latest support level would usher in another bear run after the market had set its recovering mode on motion. Again, this low price opportunity should be the right time to jump into some stocks as more third quarter earnings start rolling in. The very short bull transition in a recovery market is underway. 

Market Outlook

We expect the market to remain in its oscillating trend as external forces continue to influence trade on the exchange. The 20 per cent fundamental of the market which comes with companiesperformance in form of earnings, is expected to impact the market positively if the corporate results are good.Investors should target companies with strong earnings and growth potential to drive price and pay dividend at any market condition.

STOCKS TO WATCH

UNITED CAPITAL, NB, UBA, FBNH, FCMB, ACCESS BANK AND CAP