MARKET UPDATE FOR MAY 22, 2017

INDICATORS SLIP AS CAUTION, PROFIT TAKING, REPOSITIONING CONTINUE ON NIGERIA’S EQUITY MARKET

The nation’s stock market indices closed marginally down on Monday to start the week as profit taking and cautious trading continued, while the investing community awaits the outcome of the ongoing meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC)and expectation of first quarter GDP figures that would confirm whether the nation’s economy is out of recession. Recall that the 2016 Q1 GDP gave a hint of the nation’s economic downward slide officially after dragging in 2015.

Monday’s trading started out with upside movement, then a sharp run-up, which continued into the midday session, before pulling back early afternoon to finish the day in red.

The fact that the market is experiencing a pull back or correction at this point is expected, as it is a sign that investors should not panic because the market is entering a new phase with factors in favour of the market or that will drive stock prices going forward.

It has been very clear that in the last rally, the CBN’s policy action in the foreign exchange market dictated the outcome we saw. That's especially true when everyone is in the same boat and willing to coordinate efforts.  When central bankers and government policymakers have made it clear that they need and want the economy to bounce back, you should know what to expect of equity prices when the economy is recovering and market fundamentals are improving.

We have today an administration that wants and needs oil production output to surpass estimate to generate more revenue to drive infrastructural development.  And more recently, we have Organisation of Petroleum Exporting Countries (OPEC) that desires oil prices to rise higher that which will boost Nigeria’s reserves and attract more foreign inflow. Both of these efforts are positive for the stock market.

As I've often said, if you understand the big picture of the economy and stock market, now is the time to buy into fundamentally sound companies. 

Meanwhile, at the end of Monday’s trading session, the composite All-Share index shed 35.08 basis points to close at 28,078.30 points, from an opening figure of 28,113.38 points, representing a 0.12% decline on average traded volume of the market which was still lower, when compared to previous day’s volume of transaction. Volume traded index was 0.65 as buying position was 22% while selling volume was 78% of the total volume for the day. Similarly market capitalisation for the day was down by N12.13bn to close at N9.71trfrom an opening value of N9.72tr, also representing a 0.12% loss in value.

The downturn in the share prices of medium and high cap stocks impacted  the All-Share index, to reduce year-to-date gain position to 4.48%, while market capitalisation for same period stood at N459.9bn, representing 4.97% above the year’s opening value.

Market breadth for the day was positive as the number of advancers outnumbered decliners in the ratio of 27:17 on average volume of trade to start the week. 

Market activities for the day in terms of  volume and value were down by 32%  and 30.74% respectively to 208.08m shares from previous day’ 305.97m shares and  value  to N3.74bn from the previous day’s N5.4bn.

Transactions in the shares of DIAMOND BANK, ZENITH BANK, GURANTY, UBA and FBNH topped the activity chart as most traded equities by volume.

The benchmark index and all sectoral indices were mixed to close lower, except the NSE Insurance, NSE Industrial goods and NSE Lotus that were higher, while NSE Asem closed flat.

At the end of the day, Dangote Flourmills topped the advancers’ table, with its share price notching 6.39% to close at N4.34 purely on the interplay of market forces on the back of it improving earnings, particularly the return to profit after years of losses. It was followed by CCNN with 5.00% to close at N4.83 per share on market forces.

On the flip side, ETI led the decliners’ table, losing 5% to close at N9.31 on profit taking; followed by Cadbury with a 4.98% price decline to close at N10.12 each on market forces and profit taking. 

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 activities, especially now that prices of stocks are oscillating, if the numbers will support the price reversal.

It is 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.

Invest wisely and sign up for investdata buy & sell signal setup. For details or inquiries, visit our website @ www.investdata.com.ng