MARKET UPDATE FOR WEEK ENDED MARCH 10 AND OUTLOOK FOR MARCH 13

LOOKING TO MORE POSITIVE EARNINGS TO SUPPORT MARKET UPTREND

The equity market in the past week closed higher despite the prevailing low confidence level, liquidity problem and mixed sentiments for the ongoing earnings season that is propelling high volatility in the market as investor optimism in the numbers released so far is fading away. Slowly, the market is beginning to react less negatively to positive earnings as supply from market makers continue to becloud the market which is currently suffering from weak demand side as a result of low liquidity. 

Also, there is the absence of foreign investors and institutional investors such as Pension Fund Administrators (PFA) with over N7.23 trillion assets who are showing preference for the fixed income securities, especially bond and other money instruments in their asset portfolios. This is not unexpected, due to the high interest rate, thereby starving the equity market of funds needed to influence prices on the Nigerian Stock Exchange (NSE), considering the current low valuation in the market.   

The impressive full year earnings reports from Access Bank and Guaranty Trust Bank released to market during the review week and their stock price performances followed the same pattern as the earlier numbers released before then.  

The oscillation in the market is a function of confidence crisis from the economy which the recently released economic recovery growth plan of the Federal Government is expected to address with time, IF ONLY there will be the needed political will and strategic action plan to realize the goals of the ERGP, a master plan to revamp the economy. 

The time to do the talk is here and it must be with the right people to achieve the expected goal, planning is different from implementation. Government’s performance so far has been shown through emerging statistics and macro-economic indicators. This is the time to inject professionals and technocrats into government teams to drive this ERGP with effective ecosystem that will bring the socio-economic structural changes and engender trust in the system and government. 

This will drive the optimism of every Nigerian and the production units and in the process pull the nation out of recession. Again commitment by government to its economic recovery growth plan will help attract foreign direct and portfolio investments, besides creating employments and reducing the daily job loss. 

Meanwhile, the composite NSE All-Share Index gained 225.93 points to close the week at 25,238.01 points, after touching a high of 25,543.40 from25,012.08 points opening figure, representing a 0.9% growth for the period, with transaction volume was mildly above average as investors remained cautious of high volatility during the week.

The buying volume of total transactions for the week was 69%, while selling position was 31% to reverse the previous week’s bear market.  In the same direction,  market capitalisation for the period closed higher at N8.73 trillion, from an opening value of N8.66 trillion, representing a 0.9% gain in value, in the mix of unstable trade and mixed sentiment for corporate earnings as  the market was up for three trading sessions and down for two sessions. 

The advancers table for the week was dominated by low cap stocks as investors position in this class of stock for high dividend and growth as their financials are expected to hit the market any moment.

Stocks during the week recorded gains, especially high cap stocks like Nestle, Unilever, Julius Berger and Dangote Cement which reduced the NSEASI's year-to-date negative position to 6.09%, also for the same period market capitalisationwas pushed to a loss of N512.22 billion,representing 5.49% decline.

Market breadth was weak and negative as the number of decliners outpaced advancers in the ratio of 31:24 on a seemingly high volume of trade that were mixed and cautious,amidst position taking,despite the impressive numbers from financial sector operators. 

Global markets during the week were mixed, closing flat as crudeoil price within the period hit a three-month low but entered recovery mode, gaining0.3% Friday from almost 7% loss in two sessions in response to energy data that showed US inventories increased to a record high. 

The US markets over the week remained unchanged despite the impressive employment data that beat expectation and supported the rate hike of Fed since job gains of this level will push up wages and mount inflation pressure. The recent data revealed strong economy and the fact that manufacturing and service sectors are still expanding not looking to downturn soon.

Germany‘s DAX and  Britain’s FTSE 100  were down for the period, while Japan’s Nikkei was up, whereas  U.S markets indices were flat as oil oscillates and concerns for interest rate hike.

In Europe, the accelerating regional economy has prompted concerns over divisions in the European Central Bank (ECB) when it comes to crafting a single monetary policy for the zone. In Asia, Japan’s gross domestic product increased 0.3% in the last quarter of 2016, below the estimated 0.4%.  

Back home, the composite NSE index opened the week on a negative note, losing 0.58% which was reversed the following trading session when it gained 2.23%. The recovery was nonetheless short lived at the end of midweek trading when shed 1.4%,before turning green again on Thursday when it gained 0.74%. This was sustained on the last trading day of the week when it closed 0.27%up, bringing the week’s cumulative gain to 0.90%. 

All the sectoral indices for the period were also green, except the NSE Industrial and NSE Oil/Gas that close 2.94% and 2.36% lower respective, while NSEAsem was flat.

The week’s total transaction levels, measured by aggregate volume was down 26.62% to 1.02 billion shares from 1.39 billion shares,just as value was down by 9.25% to N12.46 billion from N13.73 billion. This was in contrast to the closing levels of previous week. In the week under review also, a total of 1.02 billion shares valued at N12.46 billion were traded in 16,400 deals, compared with 1.39 billion shares worth N13.73 billion, exchanged in 15,422 deals in the previous week.

During the week, the share prices of Africa Prudential, Transcorp Hotel and Nigerian Breweries were adjusted for dividend respectively.  Access  Bank and Guaranty Trust Bank  released their 2016 full year earnings reports to the market with dividend recommendation  (See the Price and Earnings Tracking for dividend declared), while Total Nigeria, Sterling Bank and GSK notify the exchange of the board meeting.

Nestle and Unilever led the advancers’ log with 16.96% and 11.46% respectively to close at N734.99 and N32.30, while the flip side was topped by Africa Prudential and United Capital, which suffered 15.56% and 15.09% decline to close at N2.28 and N2.42 respectively.

                                              

Market Outlook                   

The market last week had few earnings reports and if more earnings expected this week are positive the uptrend is likely to be sustained. Also the inflation rate for February is expected.  

Again, the time to combine technical and fundamental analysis for your trading decisions is now, to enable you know the support and the resistance levels. 

Train yourself and study to know the new approach to adopt at this point and going forward. 

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STOCKS TO WATCH

Fidelity Bank, Total, Fcmb, Presco, Eterna, and Aiico