MARKET UPDATE FOR THE WEEK ENDED JULY 29

NSE Indices Struggle Amidst Rate Hike, Mixed corporate Earnings Reports 

Trading on the floor of the Nigerian Stock Exchange closed the week on a positive note, reversing the four-week bear run on a mixed market sentiment for the ongoing Q2 earnings session that is below investors' expectations, besides the recent hike in interest rate that is further contributing to heat up the economy.

The unclear policy direction of government, coupled with the policy somersault at a time of falling macro-economic indicators, particularly the Consumer Price Index (CPI) for June at 16.5%- the highest in 11 years. There is a high probability of the rate rising to 17% when numbers for the just concluded month of July is released by the National Bureau of Statistics (NBS) later this month.

Government's continued delay in releasing palliative measures expected to cushion the effect of the petroleum pump price hike, electricity tariff, high cost of living and increased cost of funds that have further slowed down the economy is also not helping matters. Other indicators pointing to the fact that all may not be well with the economy include unemployment rate at 14% (official), while the Federal Government which remains the highest spender in the economy expects its revenue to drop by 45%; government borrowing at 14.98% and the Naira devalued by 30% year-to-date with likelihood of falling to 45% by year-end. All these have affected the nation's outlook with an economy in recession at a 25-year record low.

Meanwhile, the composite NSE All-Share Index gained 350.49 points last week to close at 28,009.93 from an opening figure of 27,659.44 points, representing 1.30% growth on improved weekly transaction volume of 31% sell position and 69% buy volume.Similarly market capitalisation for the period under review closed higher at N9.62 trillion from an opening value of N9.50 trillion. The bullish sentiments are gradually returning as reflected in the investors and traders confidence in the market and economy, especially with the mix of small and high cap stocks among top advancers and decliners for the week. The NSE ASI's year-to-date as mentioned earlier returned to negative 2.21%, while market capitalization for the same period was down by over more than N118 billion.

The market breadth turnedpositive but weak  for the week as the number of advancers ’ outpaced decliners  in the ratio of  35:31 on improved volume of trade with more  buying positions as against the previous week's.

Meanwhile, global markets closed the period under review on a positive note, with the U.S markets and Germany‘sDAX in the green while Britain’s FTSE and Japan’s Nikkei were in the red. The U.S markets indexes moved mixed as Federal Reserve opted to keep interest rates unchanged. Also economic indicators are pointing to the fact there is improvement in the U.S economy on the strength of positive employment data and increasing home sales to reflect strong consumer spending. Investors' cautious trading was as a result of overpriced equities as revealed by the Price Earnings Ratio, andif corporate earnings fall below investorsexpectations it may led to more profit taking in the days ahead. International equity prices were in the mixed direction as European zone economic performance for second quarter were not strong economy.

Many Euro zone countries have dragged down the regional growth, despite improvements in Spain after  ECB decision to retain interest rate, while promising to provide a stimulus packages to cushion the effects of Brexit, a situation that is raising growth prospects in the economy. In Asia, Bank of Japan stimulus package to revamp and jump-start the economy were below trader’s expectation and this can lead to dumping of equities. Chinese economic data showed improvement to support its government's efforts and boost domestic demand as revealed by its Q2GDP.

Oil prices continued to oscillate during the week  to remain  low in the recent months amidst  reports from EIA that the U.S oil inventory dropped by 2.5 million barrels and worries that Britain's exit from the EU will slow down the global economy, thereby lowering energy demand as Nigeria's crude production bounced back.

Back home, the NSE ASI opened the week in downward trend with -0.11%, it reversed and headed north on the second and third trading sessions gaining 1.14% and 0.93%. It however drifted back into red on the fourth and fifth trading sessions shedding 0.56% and 0.13% respectively.

NSE sector indices all closed upbeat except for NSECNSMRGDS, NSEINDUSTR, NSELOTUSISLM and NSE OILGAS that shed points. Transaction levels as measured by aggregate volume and value improved by 34.66% and 74.67% in contrast to last week’s closing levels. In the week under review, a total of 1.82billion shares valued at N16.22billion were exchanged in 21,181 deals, compared to 1.35billion shares valued at N9.30bn exchanged in 18,239 deals in the previous trading week.

During the week also, the share price of Red Star Plc were adjusted for dividend, while more Q2 earnings reports were made available to the investing community  to beat the deadline as required by the regulator. The following are companies that released Q2 within the week: Livestock Feeds, FBNHolding, Prestige Assurance, AXA Mansard Insurance, CAP, National Salt, Fidson Healthcare, Etranzact, Mcnichole Consolidated, NEM Insurance, Lasaco Insurance, Okomu Oil, Nestle Nigeria PLC, Diamond Bank, FCMB and Sterling Bank.

There was also a full-year earnings report from Nigerian Enamelware Plc, and interim dividend announcement of 60 kobo, 300 kobo and 15 kobo from GSK, Total Nigeria and Pharm Deko respectively.

MRS Oil and GTBank, led the advancers chart with 21.45% and 14.36% gains respectively, while the flip side was topped by Skye Bank and NEM Insurance, which suffered 17% and 12% decline respectively.

Market Outlook

The market last week had a mixed performance reacting to the 200bp hike in Monetary Policy Rate (MPR) and quality of half year earnings reports released so far. As investors and traders reposition their portfolios on the strength of numbers, expect another oscillating market.  With more banking stocks notifying the exchange of late filing to audit their half-year results, it is a signal of interim dividend from such banks.Investors and analysts are also likely to shift attention from rate hike to analyse themixed numbers released so far in relationship with market price to know the likely direction of such companies' share price going forward. Equities market recorded gain to reverse its weekly losses as investors showed opportunistic buy amidst expectations of interim dividend income from most companies.

The candlestick formation pattern as at close of trading last Friday did not suggest any direction but selling position of 95% and buy position volume of 5%,  supports a down market, depending on market forces this morning as trading open in expectation of more economic data.

STOCKS TO WATCH

FCMB, UBA, Eterna, Fidson, Zenith Bank,  Cadbury, Custodian & Allied, Ucap, Access Bank and Tigerbrand

Best Performing Stocks for July
SECURITIES	OPEN	CLOSE	%Change
MRS OIL NIGERIA	34.71	38.78	11.73
CONOIL	23.10	25.22	9.18
ZENITH INT'L PLC	15.77	16.91	7.23
CAP	34.68	37.00	6.69
DANGOTE SUGAR	6.65	7.00	5.26
OKOMU OIL PALM	32.00	33.66	5.19
PRESCO	37.00	38.85	5.00
UNILEVER	33.00	34.65	5.00
U A C N	19.99	20.73	3.70
GUARANTY	23.26	24.05	3.40
NASCON ALLIED INDUSTRIES PLC	7.96	8.09	1.63
AIICO INSURANCE	0.73	0.74	1.37

Worst Performing Stocks for July
SECURITIES	OPEN	CLOSE	%Change
SKYE BANK	1.04	0.70	-32.69
DIAMOND	2.25	1.59	-29.33
TRANSNATIONAL CORPORATION	1.77	1.31	-25.99
NPF MICROFINANCE BANK	1.21	0.92	-23.97
LAFARGE W A P C O	73.51	56.00	-23.82
FIDSON HEALTHCARE	2.45	1.92	-21.63
VITAFOAM NIGERIA	3.99	3.14	-21.30
TRANS-NATIONWIDE	1.34	1.06	-20.90
ECOBANK TRANSNATIONAL INC	16.00	12.74	-20.38
GLAXO SMITHKLINE	23.02	18.45	-19.85
P Z CUSSONS NIGERIA	23.00	18.60	-19.13
STANBIC IBTC HOLDINGS	16.20	13.25	-18.21
UNION BANK	5.10	4.18	-18.04
LIVESTOCK FEEDS	1.11	0.91	-18.02
CADBURY NIGERIA	17.35	14.27	-17.75
LAW UNION & ROCK INSURANCE	0.62	0.53	-14.52
HONEYWELL FLOUR	1.77	1.52	-14.12
AXA MANSARD INSURANCE	2.50	2.15	-14.00
OANDO	6.50	5.60	-13.85
NEM INSURANCE	1.02	0.88	-13.73
GUINNESS NIG. PLC	109.25	94.50	-13.50
LEARN AFRICA PLC	0.68	0.59	-13.24
STERLING BANK	1.44	1.25	-13.19
FCMB GROUP PLC	1.60	1.40	-12.50
FBNHOLDINGS	3.89	3.41	-12.34
UACN PROPERTY DEV. CO.	4.10	3.60	-12.20
ETERNA	2.67	2.35	-11.99
WEMA	0.84	0.74	-11.90
FLOUR MILLS	22.61	20.20	-10.66

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