MARKET UPDATE FOR MAY 8, 2017

INDICATORS INCH FURTHER, AS INVESTORS TAKE ADVANTAGE OF LOW STOCK VALUATIONS

Nigeria’s equity market continued its bullish run for the seventh consecutive day Monday, on a high volume to start the week, reflecting investors and traders’ optimism in the fundamentals of companies as reflected in the 2016 full-year and 2017 Q1 numbers, as well as emerging economic numbers that point to a gradual recovery.

The current uptrend is the longest streak since the beginning of the year.  The bull market in stocks and the recovery economy are the reasons many domestic discerning investors are taking advantage of low valuation to reposition and accumulate. Also the few international investors that were unable to exit positions before the general market downturn and those who sold their positions but could not repatriate their funds owing to scarcity of forex before now, have continued to pick stocks at a premium.

The performance of the stock market and the fact that recent gains could see its indicators out of negative position, should this momentum be sustained, means that the stock market remains a leading indicator of where the economy is headed. 

The commitment of the Central Bank of Nigeria (CBN) to sustain and maintain stable exchange rate through a systematic supply of liquidity to the various segments of the foreign exchange must also be acknowledged. Among others, it has propelled the increasing productivity as reflected in the recently released manufacturing sector’s PMI (Purchasing Managers Index), which stood at an all-time high of 58 points, helped by the interventions that have ensured liquidity supply to Small and Medium scale Enterprises (SMEs), which remain the engine room of economic growth and development, especially as they generate huge employment across the country. 

While INVESTDATA continues to commend the CBN forthe new the intervention under its new forex policy, which has impacted all sectors of the economy,we dare to stress once more that the time for a further push towards a single exchange rate has come. Among others, this would greatly help to sustain stability in the forex market and encourage the inflow of more Foreign Direct or Portfolio Investments. 

Meanwhile, the composite Nigerian Stock Exchange (NSE) All-Share index gained 182.72 basis points to close the trading session at 26,418.33 points, from an opening figure of 26,235.63 points, representing a 0.7% growth on above average market traded volume. But it was lower when compared to previous day’s volume. Similarly, market capitalisation for the day went up by N63.06 billion close at N9.13tr from an opening value of N9.07tr, representing also a0.7% value increase to bring investors total gain so far to N221bn. 

The upturn in medium and high cap stocks further impacted the All Share index to reduce year- to-date negative position to 1.69%, while market capitalisation adjusted down to N114.67 billion, representing 1.24% loss YTD, from the year’s opening value.

Market breadth for the day remained positive and strong to kick start the week as the number of advancer soutpaced decliners in the ratio of 26:12 to continue seven straight days of bull run.     

Market activity in volume and value were mixed as the volume was down by 39.56% to 267.64m shares from previous day’s 442.83m shares, while value gained 10.14% to N3.26bnfrom previous day’s N2.96bn.

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

The NSE All-Share index and all sectoral indices closed higher, except the NSE Industrial Goods, which fell.

During the day’s trading, the share price of Aiico, Medview,Nestle Nigeria and FBN Holdings were adjusted for dividend recommended by their directors. The rebound of these companies whose share prices were adjusted on Monday shows that the bull is in full charge. 

At the end of the day, Oando topped the advancers’ table, with its share price rising by10.04% to close at N7.88 on the activities of market forces; followed by 7-Up Bottling Company with 9.72% to close at N103.89 each on the back of the interplay of market forces and expectation of its full-year result.

On the flip side, Champion Breweries led the decliners’ table, losing 4.67% to close at N2.04 purely on market sentiments; followed by Jaiz Bank, which dropped 4.55% to close at N1.05 on market forces.

As market opens this morning, expect mixed performance as profit booking is underway. 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 first quarter earnings reports are out to give insight of what should be expected at year-end.

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.

NSEASI ON DAILY TIME FRAME

The index on daily time frame continues it uptrend on a high volume that supported positive market breadth on high stock prices. Monday’s volume index was at 1.04,with buying position was 94% and selling volume, 0% of the day’s total, to continue the bull rally. Market sentiments remain positive on improving company fundamentals as revealed by recent numbers emanating from the listed companies, especially Q1 earnings reports and positive economic data that continue to drive high demand for stocks. 

Nonetheless, the NSE’s trending ability and direction is still weak as ADX is below 20 at 8.41, while MFI is looking up to indicate money is entering the market as at close of trading. MACD is still bullish, while RSI is reading 68.56 which is at the overbought region to close Monday’s trade. The candlestick formation pattern at the upper band of Bollinger signals imminent reversal of the market trend, as traders start cashing out.