MARKET UPDATE FOR WEEK ENDED SEPTEMBER 2

NSE Indexes Close Higher Amidst Gloomy Economic Data

The Nigeria stock market again recorded a mixed performance to close the week higher, as investors and traders reacted to the negative economic data and reinstating of the banks earlier suspended from the FX market. 

The current state of the economy as revealed by the latest data released by the National Bureau of Statistics (NBS) should impress on government and its agencies the need to rethink some of their earlier policies, because going forward from where the economy is today is a function of well-articulated policies that will drive development and growth while improved liquidity with low cost of funds will stimulate economic recovery.  Anywhere in the world higher interest rates do not support economic growth, as businesses profit and consumer spending are affected negative.

It will be a great disservice to Nigerians if the current economic situation deteriorates to that of the early 80s and 90s, despite today's level of education, awareness and exposure of many Intellectual in this country. The continuous lack of complementary monetary and fiscal policies, just as the policy somersault, which is likely to persist.

The macro element or scenario  in the financial sector in 2009 has resurfaced again not from the capital market this time, but from the oil sector thereby putting a lot of debt burden on the banks. Add this to the current situation where government continues to heat up the system with unfriendly policies and over regulation that have weakened the ability of banks to play their roles as engines of economic growth and development. 

The continued mop up of liquidity in the midst of low  liquidity in the system shows that CBN  on it own is cash-strapped or having liquidity challenges to meet its own obligations. If government, the highest spender in any economy is complaining of funds, what will be the fate of small businesses. 

The NSE All-Share Index gained 305.76 points to close at 27,756.67 points, from an opening figure of 27,450.91 points, representing a 1.11% growth on a relative low volume of trades that signifies underplay of smart money in the market to markup prices. Buying volume of total transactions for the week was 38%, while selling position was 62% to reverse the previous week's down rally. 

In the same direction, market capitalisation for the period closed higher at N9.54 trillion from an opening value of N9.43 trillion representing 1.13% increase.  The mixed sentiments revealed traders positioning in equities that had suffered decline in recent times and interpretation of the data on the economy going forward. 

The top advancers were a mix of large and small cap stocks that had suffered price decline earlier and the low prices of these equities were the attraction. The NSE ASI's year-to-date had returned to negative 3.09%, just as market capitalisation for the same period.

Market breadth for the period was almost flat as the number of decliners outpaced advancers  in the ratio of 31:28 on a  flatvolume of trade amidst the mixed sentiment positions compared to previous week’s  bear session. This indicates gradual move of smart money to markup prices in the market.

Global markets over the past week closed on a positive note as crude oil price retraced, as more OPEC member countries support output control to drive oil price above the recent resistance levelof $50.

Despite hints about rate hike that will hit the economy and its impact on the global financial market, international stocks are jumping higher in the midst of weak August non-farm payrolls.

U.S markets indexes, Britain’s FTSE, Japan’s Nikkei and Germany‘s DAXclosed green in the period under review. In US markets, the odds of a September interest rates hike is declining as August non-farm payrolls fell below forecast  with more statistics expected this new week will support or weaken the proposed hike. The slowing down of equity price movements in U.S markets have reflected on its major indexes. 

Traders have strategically started exiting position as their eyes are on the expected economic data.

In Europe, economic activities have been up, despite the fearof Brexit and results of banks stress test recently released and Mrs Kemi Adeosun, the Finance Minister saying there will be no bail out, but support measure for any banks that failed the test.

In Asia, theJapanese economy, after the second quarter growth were nearly hindered as a result of falling exports and weak corporate investment. China's rate cut is expected to boost economic activities as cost of funds become cheap to do business.

Back home, the NSE ASI opened the week on a negative note with marginal loss on the first trading day of the week. This was reversed on the second trading  session with the market recording a gain, maintaining it on the third and fourth days before the pullback on  the fifth day, when it closed in the red, losing 2.30% to reduce the week's gain. 

All the NSE sector indices finished higher, except for the NSE Industrial Goods index that declined by 0.24% and NSEASeM that closed flat.

The market transaction levels as measured by aggregate volume and value  declined marginally by 0.80% and 0.14% respectively, in contrast to the closing levels a fortnight ago. In the week under review, a total of 1.115 billion shares valued at N13.82 billion were exchanged in 16,083 deals, compared with 1.124 billion shares valued at N13.84billion traded across 15,625 deals in the previous week.

During the week also, the share price of Guaranty Trust Bank were adjusted for dividend, while the management of GSK moved the closure date for the special dividend to Octocber 3, 2016.

Seven-Up Bottling Company and Wema Bank led the advancers chart with 28.23% and 17.19% gains respectively for the week, while the flip side was topped by  May& Baker and  Unity Bank  which suffered 19.31% and 10.71% decline respectively.

Market OUTLOOK                                                                                          

The market last week was up as investors and traders took advantage of low prices of equities as the nine suspended banks were readmitted to the FX market by the CBN in the midst of negative economic indicators.

This week is likely to experience pullback as investors sell off to meet September needs.Again, traders and fund managers also will berepositioning for the new month in anticipation of quick fix policy of the government to revamp the economic again. As less earnings reports are expected at this time to drive price but quarterly earnings released so far in the year should guide investors’ decision.

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. The buying volume of 2 percent of the total volume traded as at Friday and selling position of 98 percent is not encouraging. 

STOCKS TO WATCH

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

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