MARKET UPDATE FOR MAY 15, 2017

NIGERIA’S STOCK MARKET IN PANIC MODE, AS WARY INVESTORS TAKE PROFIT

It was a disappointing start for the week, Monday, on the Nigerian Stock Exchange as the benchmark indices with the bears maintaining control of the market from the early morning trading session till end of the day.
In the process, there was price adjustment in highly capitalized stocks that recorded losses, contributing majorly to the downturn amidst profit booking, confirming INVESTDATA’s warning in the recent past that the party is indeed over for now. Taking a cue from signals given last Thursday and Friday, investors took to the exit door in a frenzied bid to sell whatever they could at the same time, leading to this last decline that plunged the market into a year-to-date loss. With no new information to change the direction of things just yet, the bear-run might likely continue this morning as market opens with smart money taking a flight to safety, which would give room for repositioning again. 

Investors with medium to long term investment perspective should not panic out of their position and in the process realize their loss at a time the economy seems to be recovering gradually from recession with factors showing up that would to trigger the much needed rebound in the short time.

The Central Bank of Nigeria (CBN) has continued in its effort to sustain the supply-side of the FX market, which has greatly enhanced market liquidity; added to the recent adjustment of pension funds investment in the equity market to 30% of their investible funds, a move expected to further enhance liquidity if implemented faithfully.

There is also the expected impact of the 2017 Appropriation Bill, which waspassed into law by the National Assembly last Thursday, which is expected to be transmitted to the executive arm for Presidential assent to commence implementation that will impact the economy and indeed the lives of Nigerians positively.

Stock markets around the world had a mixed performance to close higher as the price of oil rebounded on the extension of production cut deal reached in November last year by the Organisation of Petroleum Exporting Countries (OPEC) to March 2018.Saudi Arabia and Russia, the biggest OPEC and non-OPEC member respectively, agreed to extend their production cuts to enhance the price and in the process drive the global economy. This has helped to move the price above $50 last week to $52.07 as it crosses the 50 and 200-Day moving average.  

Meanwhile, the NSE’s composite All-Share index recorded its highest loss in a single day so far this year, shedding 678.77 basis points to close yesterday’s trading session at 27,513.69 points, from an opening figure of 28,192.46 points, which represented a 2.41% decline on a high volume traded, but lower when compared to previous day’s volume of transactions.

Similarly, market capitalisation for the day fell N234.64bn to close at N9.51tr from an opening value of N9.82tr, representing also a 2.41% depreciation in investor’s portfolio.

Lossing value recorded by medium and high cap stocks further depressed the All-Share index, reducing year-to-date position to 2.38%, while market capitalization for same period stood at N263.97 billion, representing 2.85% above the year’s opening value.

Market breadth for the day turned negative and weak as the number of decliners outpaced advancers in the ratio of 41:10 on a  high volume of trade that supported two day bearish market.

Market activities in volume and value were down by 36.89% and 13.92% respectively to 678.77m shares, down from previous day’s 1.06 billion shares, while value drop to N7.91 billion, double previous day’s N9.19 billion.

Transactions in the shares of ZENITH BANK, ACCESS BANK, ETI, FBNH and GURANTY TRUST BANK topped the activity chart as most traded equities by volume

The NSE All-Share index and all sectoral indices were in the red, except the NSE Asem  that closed  flat to the end  the day’s trading.

During the day’s trading, share price of Dangote Cement was adjusted for dividend of N8.50 recommended by its directors. At the end of the day, Law Union & Rock Insurance topped the advancers’ log, with its share price rising by 5.00% to close at N0.84 on the activities of market forces; followed by Presco with 4.25% to close at N49 per share on market forces and bullish sentiments for dividend.  

On the flipside, Oando led the decliners’ log, shedding 9.63% to close at N7.79 purely on market forces; followed by Eterna, which dropped 9.51% to close at N3.53 on market forces. 

As market opens this morning, expect profit booking to continue. That means investors should not panic if they take position based on strong numbers and future prospects of any stock.

Again, we advise that investors allow numbers to guide their decisions to reposition for the rest of the year’s trading, especially now that prices of stocks are flying, if the numbers will support the price going forward. Time to use your technical tools to take decision to hold or exit any position.

Once more at the risk of repeating oneself, we must reiterate that industry potential is very important when picking a stock, because there are factors that are sector-specific and would naturally impact positively or negatively on companies operating within such an industry.