Delayed Economic Data, CBN Suspension Of Nine Banks Pull Back NSE

Trading on the  Nigerian Stock Exchange  closed last week lower on a  mixed performance as earnings reports remain light  with UBA hitting the market with positive audited half-year numbers, while maintaining its new interim dividend  payment policy to the delight of shareholders. 

The mixed sentiment during the week's trading sessions were attributed to low equity price valuation and reactions to the CBN suspension of nine banks from the foreign exchange market. The banks, including seven quoted on the NSE, failed to transfer  foreign currency deposits belonging to the Nigerian National Petroleum Corporation (NNPC) to the Treasury Single Account (TSA) at the apex bank as directed. This reversed previous week's bull transition, just as the liquidity cycle in the system has affected the market with impressive half year results of interim dividend paying stocks influencing price movement positively.

The delayed release of Q2 economic data, including the Consumer Price Index (CPI) for July by the National Bureau of Statistics (NBS) has sent caution to potential and discerning investors. This is because data to guide investment decisions are not available to ascertain the state of the nation economy until Wednesday, August 31.

Also, the inconsistent policies and unclear economic policy direction of the government have not helped matters, with many local and international investors still on the sideline. This is causing harm to the system as can be measured by the declining industrial output. Government should put the same energy and commitment used to beef up the nation's security into revamping this economy to trigger quick and progressive change.

Meanwhile, the composite NSE All-Share Index shed 199.40 points to close at 27,450.91 points, from an opening figure of 27,650.32 points, representing a 0.72% decline on a low transaction volume that signifies possibility of markup in prices by smart money. Selling volume of total trades for the week was 72% and buying position, 28% to reverse previous week's bull sentiment.

Similarly, market capitalisation for theperiod closed lower at N9.43 trillion from an opening value of N9.50 trillion. The mixed sentiments revealed traders positioning in equities that had suffered decline in recent times, while others were bailing out of the bank's suspended from the FX market. Income investors were however keying into companies that declared interim dividend.

The top advancers were a mix of large and small cap stocks that had suffered price declines and the low prices of these equities were the attraction.

The NSE ASI's year-to-date had returned to negative 4.16%, just as market capitalisation for the same period.

Market breadth for the period was almost flat as the number of  advancersoutpaced  decliners  in the ratio of 27:25 on a declining volume of trade amidst the mixed sentiment positions compared to previous week’s bullish transition. This indicates gradual move of smart money to markup prices in  the market.

International  marketsover the past week had a mixed performance to closed on a positive note as crude oil price pulls back. This follows plans by OPEC to control supply and drive oil price up, coupled with long awaited speech by Janet Yellen, chairperson of the U.S Fed to give hints about whether or not rate hike will hit the economy with impact on the global financial market.

U.S markets indexes, Britain’s FTSE and Japan’s Nikkei were down, while Germany‘s DAX was up. In US markets, the much awaited speech by Yellen has come to support the strong position that the economy is strong and improving to allow the prolonged rate hike. The slowing down of equity price movement in US markets have reflected on its major indexes. Traders are likely to start exiting position that may cause selling pressure.  

In Europe, economic pointer have been showing steady growth across the zone, despite the fear of  Brexit impact on the region. The monetary measure of the European Central Bank has supported the region's economy.

In Asia,  theJapanese Yen continues to move higher,  despite  the central bank's Quantitative Easing and fiscal stimulus by the government to boost  local production. Less key economic data were released this period.

Back home, the NSE ASI opened the week on a marginal gain on the first trading day of the week, it maintained the gains on the second session, before closing flat on the  third day. Thereafter, suffered a significant slide on the  fourth session and reversed this on the fifth day, when it closed in the green, gaining  0.26% to reduce the week's loss position.

NSE sector indices were all in the red, except for the Main BOARD, NSE 30, NSE Banking, NSE Insurance, NSE Consumer Goods, NSE Oil/Gas and NSE Pension  indices. They gained 1.93%,0.86%, 0.04%, 0.93%, 6.74% and 1.21% respectively, while the NSE ASeM closed flat.

Transaction levels as measured by aggregate volume  declined by 18.84%, while value improved  by 6.96% in contrast to the closing levels a fortnight ago. In the week under review, a total of 1.12 billion shares valued at N13.84 billion were exchanged in 15.625 deals, compared with 1.38 billion shares valued at N12.94billion traded across 16,916 deals in the previous week.

During the week also, the share price of Custodian &Allied Insurance, AG Leventis, Total Nigeria and Zenith Bank, were adjusted for dividend, while the management of UBA made available its  Q2 earnings reports to the market with interim dividend of  N0.20 and closure date September 12. Seplat and Forte Oil  led the advancers chart with 14.58% and 10.58% gains respectively, while the flip side was topped by  FCMB  and  AG Levenits  which suffered 14.96% and 10.10% decline respectively.

Market Outlook                                                                                        

The market last week was down as investors and traders reacted to low prices of equities, delay in release of key economic data and CBN suspension of nine banks from FX market. These factors were interpreted different to trigger mixed sentiment.

This week is likely to experience another mixed performance again as traders and fund managers balance their trading account for the month August, also the investing community will be closely watching key economic data like Q2 GDP and Consumer price inflation, despite the fact that these numbers are  belated.  GTBank's share price will be marked down this week for the N0.25 dividend, while Stanbic IBTC is likely to release its belated quarterly and full-year reports this week.

The candlestick formation pattern as at close of trading last Friday signifies continuation of trend as smart money move to markup price on low volume. However, wait for confirmation  as market forces this morning will determine the direction, as buying position as at Friday were 60% of the total volume traded and 40% selling position. 

STOCKS TO WATCH

 CAP,  Zenith Bank, UBA, Eterna, Ucap, Access Bank and Wapco

Ambrose Omordion
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