MARKET UPDATE FOR MAY 17, 2017

INVESTORS AWAIT BUDGET 2017 ASSENT TO SUPPORT NIGERIA’S ECONOMY, EQUITY MARKET

The gradual rebounding of the market after the recent pullback from bullish run is evidence of connection between the recovering economy and the stock market. If this economic recovery momentum is sustained to support the companies and market fundamentals to drive investor confidence as positive factors and news will continue to trigger demand for stocks, especially as the prices of equities remain low, compared to the intrinsic values of the companies.

Also, the continued improvement in crude oil output as a result of peace in the Niger Delta to meet and surpass the benchmark output will further boost government’s revenue to fund the budget, even as the Royal Dutch Shell, which operates in Nigeria as Shell Petroleum Development Company(SPDC) says it has completed repairs of the damaged oil pipeline which forced the company to shut down the Nembe Creek Trunk line in February. This is seen as an indication that oil price will continue to rise as the country is continues to enjoy exemption from the OPEC production cuts. This would be greatly enhanced by extension of production cuts by members of the Organization of Petroleum Exporting Countries (OPEC) to support price of the commodity, from which they graciously exempted Nigeria owing to its long years of non-production arising from the Niger Delta crisis. Nigeria depends mainly on oil for most of its dollar receipts and budget funding.

Still on the budget, Professor Yemi Osinbajo, Nigeria’s acting President is set to assent the 2017 Appropriation Bill into law, after being satisfied with the document as passed, according to LaoluAkande, his spokesman. This would allow for implementation, which would inject liquidity into the economy as the Federal Government begins to execute capital projects captured in the N7.44tr spending plan, which represents an increase of about N140bn over the N7.298tr originally proposed by the Presidency. The infrastructure component is estimated at N2.24tr, for projects in sectors of the economy like railway, social housing, special economic zones, social investment, river basin development, Presidential Amnesty Programme, as well as development of the Niger Delta and North East region.

The all-important Bill was passed by the National Assembly based on assumptions such as: oil price benchmark of $44.50 per barrel, average crude oil production of 2.2m barrels per day and foreign exchange rate of N305/$.

Meanwhile, the composite All-Share index of the Nigerian Stock Exchange (NSE) gained 290.77 basis points to close mid-week’s trading session at 27,900.44 points, from an opening figure of 27,609.67 points, representing a 1.05% growth on above average traded volume of the market which was still lower, when compared to previous day’s volume of transaction.

Similarly, market capitalisation for the day went up by N100.51bn to close at N9.64tr from an opening value of N9.54tr, also representing a 1.05% appreciation in investors’ portfolio.

Value gained by medium and high cap stocks significantly impacted  the All-Share index, to push  year-to-date gain position to 3.83%, while market capitalisation for same period stood at N397.66bn, representing 4.25% rise above the year’s opening value.

Market breadth for the day remained positive as the number of advancers outpaced decliners in the ratio of 25:13 on a high volume of trade that continue  the two day bull transition. 

Market transactions are still trending down as volume and value dropped by 34.74% and 47.76% respectively to 371.46m shares, from previous day’s 5669.18m shares, while value declined to N3.49bn, from the previous day’s N6.68bn.

Trades in the shares of ACCESS BANK,GURANTY TRUST BANK , UBA, FBNH and LAW UNION INSURANCE  topped the activity chart as most traded equities by volume.

The NSE All-Share index and all sectoral indices were in the green, except the NSE AseM that closed flat.

At the end of the day, Oando topped the advancers’ log, with its share price notching 9.90% to close at N8.55 purely on the interplay of market forceson the back of its planned acquisition of the Port Harcourt Refinery, thereby enhancing revenue and profit. It was followed by May & Baker with 9.84% to close at N1.34 per share on market forces.

On the flipside, C &I Leasing led the decliners’ table, shedding 8.22% to close at N0.67 on profit taking; followed by Law Union& Rock Insurance which dropped 4.76% to close at N0.80 each on market forces. 

As market opens this morning, expect mixed action of profit taking and repositioning in value stocks 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 pulling back, if the numbers will support the price reversal. Time to use your technical tools to take decision by knowing the support and resistant level to reposition 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 especially now that the economy is recovery.