MARKET UPDATE WEEK 30

Positive Investors Sentiments Support Post MPC Rally

At the end of three trading sessions of mixed performance for the week, due to two-day public holiday to commemorate the Eid-el-KabirSallah festivities, the bulls dominated as the Composite NSEASI traded above its two-week resistance zone to break out its ascending triangle formation pattern with huge volume to signal new uptrend. The bullish signal of double bottom and short wave 2motive or long wave 4 patterns that were recently formed, supported the very short bull transition in a recovery market as revealed by the chart patterns.  It is expected that the positive reaction of traders and investors to the decision of the Central Bank of Nigeria (CBN) to reduce the Cash Reserves Ratio to 25 from 31 percent of private and public funds, thereby providing more liquidity to stimulate economic growth at a time the Federal Government began the implementation of the Treasury Single Account (TSA).

The pressure on the global equities market is a reflection of the confidence crisis and dwindling growth rate of the major economies of the world, as China, U.S and European countries are struggling with their production and purchasing capacity. This is showing on their stock markets as a leading indicator of any economy, with equities prices suffering a decline.

The market closed positive on last Wednesday, but the Composite NSEASI still recorded a marginal 0.70 per cent gain to close at 30,543.17 from an opening figure of 30,332.68 basis points, a different of 210.49 points.  The year-to-date negative return dropped to 11.87per cent. Market Capitalization also closed last week at N10.50 trillion from an opening value of N10.43 trillion recorded in the previous week. In the same vain, all the sectorial indices for the period closed positive except the NSE Banking and NSE Pension that were down by 0.66 and 0.28 per cent respectively. On the big board, the decliners outpaced advancers by 36 to 29. Despite the mixed performance recorded in three trading sessions of the week, market breadth remained positive and strong. 

NSE ASI Daily Chart

The ascending triangle on the daily chart of the NSEASI  was finally broken on the week’s last trading day to continue upside  trend on strong volume  with marginal gained to support the bull-run, especially as the market enter the last trading week of the month with earnings season commencing in  the coming weeks. Also, the index crossed the 50-day moving average which is the violet line is a sign of bullish move and a recovering market. 

Meanwhile, the long awaited ministerial list is expected to become public this week, when President Muhammadu Buhari sends it to senate for confirmation or otherwise. The federal cabinet inplace is expected to provide the required economic reforms blueprint that would rejuvenate the economy and compliment the CBN’s monetary policy of stimulation.   

Market Outlook

On the strength of the relative positive outcome of last week’s MPC meeting and expected end of the month repositioning of portfolios by fund managers, we expect the market to remained bullish and maintain the current trend.  It is expected that the nation’s governance and fiscal environment to support the external reserves to attract more institutional investors, if a clear government economic policy are articulated and made available.

STOCKS TO WATCH

NB, ACCESS BANK, United Capital, UBA, FBNH, FCMB AND CAP