MARKET UPDATE FOR MAY 24, 2017

PROFIT TAKERS LURK, AS INVESTORS SAVOUR NIGERIA’S IMPROVED ECONOMIC DATA

The Nigerian equity market on Wednesday responded positively, just as expected, to the huge of economic data released by the National Bureau of Statistics (NBS), showing that 2017 first quarter GDP contracted by 0.53%, a significant improvement year-on-year over the negative GDP of 1.72% recorded in Q4 2016. The improvement, analysts agree,confirms along with other economic indices before now,that the Nigerian economy is on recovery path, a situation that would further boost the market fundamentals.

The NSE benchmark index closed higher to continue the recovery move in the market with improved demand for stocks as revealed by the volume traded index was 0.94, buying position was 82%, while selling volume was 18% of the total volume for the day. 

Investors are looking beyond the data because most of the economic data are backward looking or historical, while stock markets are forward looking as a leading indicator that point to where the economy is heading. One of the key data pointing to support the economy recovery is the corporate earnings, looking at the numbers posted by listed companies, since every investment is against expectation. The market slowed down slightly as a result of the end-of-month profit taking and early June, as investors and traders position for second quarter earnings expectation, going forward which are likely to look up and indeed push prices higher if the numbers beat expectation.

Stock markets around the world were up at the mid-week as traders and investors look forward to the outcome of the meeting called by the Organisation of Petroleum Exporting Countries (OPEC) today. One of the largest oil producers and important members of the cartel- Saudi Arabia needs $83pb of oil price to balance its budget according to the International Monetary Fund (IMF), an indication that the kingdom would agree to an extension of the production cut. With these dynamics at play, it is safe to expect that oil price would likely hit the $80 mark again around mid-2018, which would be a significant boost for Nigeria foreign reserves and economy. This is against the backdrop of the nation’s continued exemption from the output cut agreed last November by OPEC. Nigeria’s production level, now at 1.8m barrels per day of crude, is expected to return to the 2.2m bpd OPEC quota prescribed for her in June, provided the peace in the Niger Delta region is sustained by the Muhammadu Buhari administration as it is working at.

Meanwhile, the NSE’s composite All-Share index at the mid-week gained 193.13 basis points to close at 28,286.43, after opening from 28,093.30 points, representing a 0.69% growth on a high volume that is above average traded volume of the market which was higher, when compared to previous day’s volume of transaction. Similarly market capitalisation went up by N66.77bn to close at N9.78tr from an opening value of N9.71tr, representing a 0.69% gain in investors’ portfolios.

The upturn in prices of high cap stocks during the day impacted the All-Share index positively,further boosting year-to-date return to 5.25%, while market capitalisation for same period stood at N531.85bn, representing 5.71% above the year’s opening value.

Market breadth for the day was positive as the number of advancers outpaced decliners in the ratio of 27:19 on high volume of trade to continue the up market.
Market activities for the day in terms of volume and value were up by 46.36% and 58.72% respectively to 311.28m shares from previous day’s 212.68m shares and N3.46bn from previous day’s N2.18bn.

The All-Share index and all sectoral indices were in green at the close of the day’s trading, except the NSE Lotus II while NSE Asem closed flat.

At the end of the day trading session, Vitafoam topped the advancers’ table with its share price gaining 6.32% to close at N2.69 per share, purely on market forces and improving earnings. It was followed by CCNN wit h4.99% gain to close at N4.84per share also on market force.

On the flip-side, John Holt led the decliners’ table, dropping 6.35% to close at N0.59 on the interplay of demand and supply; Oandofollowed with a 5% price decline to close at N8.55 each on profit booking.

As market opens this morning, expect mixed action of profit taking and repositioning in value stocks to continue, which 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.

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