MARKET UPDATE FOR THE WEEK ENDED JUNE 17

New Flexible FX Policy of CBN drive NSE High, despite Negative Economic indicators. 

Trading on the floor of the Nigerian Stock Exchange close the week on a positive note to reverse the two week down market of profit taking and waiting for the released guideline. This was as a result of the recent CBN announcement on flexible FX regime that will be market forces driven.  

The Composite index NSEASI gained 2,014.65 points to close at 29,247.27 from an opening figure of 27,232.62 representing 7.40 percent growth as speculative investors and traders jump back into the market to profit from policy driven bull transition that reverse during the mid-week trading session on a huge volume that were sustained to last Friday trading. The performance indicators NSEASI and market capitalization hit the psychological line of 29,000 and N10 trillion to close higher to bring the market to positive. The week upturn was strongly supported by price appreciation of highly capitalized stocks that dominated the top 10 advancers for the period under review.  The market capitalisation for the period closed higher at N10.05 trillion, from its opening value of N9.35 trillion, which also represented a 7.40 percent increase in value.  The NSEASI's year to date return currently stands at 2.11 percent. 

The market breadth for the week was strong and positive as the number of advancers outpaced decliners in the ratio of 44 to 24 on improved volume to reflect investor’s optimism and positive reaction to the new FX policy of the government. 

The global markets for the period under review close lower, opposite of local bourse performance for the week as  US markets, Japan,  UK  and  Germany indexes drop sharply as investors remain cautious of economic situation of the G7 country and BRICs.  US markets were down after the Federal Reserve confirmed investors fear about the strength economy in an election year. After the May employment data that was the weakest monthly gain in the last five years, as the central bank postponed interest rate hike to hold rates steady at near record lows. And at the same time warned that future increases were likely to occur at a slower pace. 

In Europe, the UK vote on whether or not to leave the European Union has been a constant overhang on the market which contributed to German bond yields going negative for the first time.   Coupled with the fear of low interest rate that could have negative effect on the economy at the end of this second quarter.  Japan and Chinese stocks moved lower to reflect economic data of the two countries. Back home, the market opened the week on the negative note with 0.47 percent dropped, it continued in red for the second trading session to close down with 0.26 percent and the midweek reversal of the market to close up with 3.17 percent, the remaining two trading days close respectively on a positive note with 2.14 percent and 2.66 percent. However, the rebound of the market for that three days were as a result positive sentiment due to CBN FX policy.

The NSEASI and other sectorial indices closed in green, except for NSEASEM that decline by o.17. The week's transaction levels, measured by aggregate volume and value, increased by 107 percent and 159 percent respectively in contrast to  previous weeks closing level.

In the week under review, a total of 2.16 billion of shares valued at N20.39 billion were exchanged in 24,369deals, compared to 959.92million shares valued at N7.87billion exchanged in 17,561 deals in the previous trading wee

During the week under review also, the share price of the following stocks Beta Glass, Fortis Micro finance, Lafarge Africa, and McNickswere adjusted for dividends and bonus declare share for shareholders

Also, five companies released their quarterly earnings, while two released full-year figures. They are Presco, Japual, Austin Laz, AG Levities May  and  Baker.   Smart Products   declared dividend of 26 kobo AG Levent;s  proposed 10 kobo dividend for approval by its shareholders. Champo in Breweries   and FBNH   led the advancers chart with 27.31 and 15.83 percent gains respectively, while the flip side was topped by Fortis Microfinance and GSK which suffered 49.90 and 21.91per cent decline respectively.

Market Outlook

The market is likely to experience a mixed performance due to short term profit taking that is underway. Early positioning for the March year end account and Q2 earnings season may change momentum and the direction however, depending on market forces during the week. Technically, market looks healthy for recovery with the oscillating mood. The candlestick formation pattern as at close of trading last week signals continuation of up market.  The advice that you buy in stages is applicable in this new week, which means that that if you have N500,000 to invest in a stock for now, begin with buying N150,000 worth of that stock and watch market trend and the stock's direction. The weekly buy volume of 99 percent and sell volume of 1 percent support strong opening this morning but finally its market forces that determines direction. 

STOCKS TO WATCH

UBA, Oando, Eterna, FCMB, Zenith Bank, Livestock, Transcorp, 7-Up, Custodian & Allied, African Prudential, Access Bank and Tigerbrand