MARKET UPDATE FOR MARCH 29

INTEREST IN INSURANCE STOCKS, PUSH TRANSACTION VOLUME

The Nigerian stock market’s volatility continued on Wednesday, with the benchmark indicators closing lower,even despite a huge volume of trade from Insurance stocksin the early hours of the day as foreign investors enterthe sector on the back of premium off market deals to continue itspullback on losses from medium and high cap stocks.

Market players sold to reposition for the second quarter which begins next week, in expectation of better GDP, Inflation and Purchasing Managers Index(PMI) figures in Q2, especially with the Naira appreciating, which could help a market rally. This is however predicated on the ability of the Central Bank of Nigeria (CBN)to work towards a single exchange rate regime, avoiding capital control to attract foreign investment inflow. When the foreign portfolio investors know actually there is free entry and exit, not a situation where the funds are held back at the point of being repatriated. 

The volume index was 2.18, buying position at 26%,while selling volume stood at 74%, revealing bearish sentiments, despite the increasing number of earnings reports released during trading with mixed performance as few of them recommended payment of dividend to investors. 

Global markets closed mostly higher as Oil prices trended up on the support of a weaker dollar, but crude continued to be weighed down by surging U.S. production and uncertainty over whether an OPEC-led supply cut is big enough to rebalance the market. 

As expected, Prime Minister Theresa May filed formal Brexit divorce papers today, with the United Kingdom entering into uncharted territory and years of uncertain negotiations that will test the endurance of the European Union. 

Meanwhile, the composite NSE All Share Index shed 139.04 point to close at 25,267.68 points, from an opening figure of 25,406.72 points on a huge volume which was lower, when compared to the previous day’s figure.

Similarly, market capitalisation for the day fell by N48.11 billion to close at N8.74 trillion, from an opening value of N8.79trillion, just as the All-Share index’s year-to-date negative position increased to 6.03% and market capitalisation adjusted to N504bn, representing 5.50% loss YTD, from the opening value.

Market breadth for the day remained positive as the number of advancers outpaced decliners in the ratio of 21:14 to extend the two trading sessions of down markets.Market activities in volume and value were mixed with volume traded dropping by 15.79% to 771.6m from N916.26m in the previous day transaction, while value was up marginally by 6.02% from N2.47bn in the previous day to N2.62bn.

The insurance sub-sector was the busiest as Custodian & Allied Insurance and Continental Reinsurance were the most sought after, besidesDiamond Bank, UBA and FBNH that also dominated the day’s activity chart as most traded equities by volume.
The NSE All-Share index and all sectoral indices were in the red to close the day trading.

During trading, CAP Plc, Wapic, Aluminum Extrusion, Trans nationwide express, Aiico Insurance, Custodian & Allied Insurance  released their 2016 full-year earnings reports, while Royal Exchange Insurance filed for late submission.

Transcorp Hotel led the advancers log with 10.04% to close at N5.04,driven by market forces, followed by Air services with 4.84% to close at N3.25 on dividend expectation; while FCMB topped the decliners log, losing 6.40%to close at N1.17, a day after the directors submitted its 2016 financials offering 10 kobo dividend per share just like in 2015, despite the significant rise in 2016 net profit. Unilever Nigeria shed 5.6% to close at N32.00 per share on low dividend payout. 

NSEASI DAILY TIME FRAME



The index on a daily time frame continues its pullback on selling pressure, resulting from the bearish sentiment on low payout and dividend cut. Index action still remains outside of the falling channel on a huge volume trending down.

The expected earnings reports and market forces will determine continuation of trend or reversal at the next trading session.
The index candlestick formation pattern as at close of trade supports a bear move, as selling pressure continues, to end the quarter and reposition for second quarter in expectation of Q1 2017 results.

Meanwhile, funds are exiting the market as indicated by MFI, while the current trending ability of the market on a daily time frame is weak, as ADX is below 20 at 17.10, MACD is still bullish and has remained so over the past 15 trading sessions, while RSI is reading 45.83 as at the close of trading.

Industries to watch in second quarter

Insurance , Banking, Services and Agribusiness.