MARKET UPDATE FOR THE WEEK ENDED MAY 19 AND OUTLOOK FOR MAY 22-26

Trading activities on the floor of the Nigeria Stock Exchange over the past week closed lower amidst interplay of profit taking, price adjustment in highly capitalized stocks and repositioning in valued stocks by market players ahead of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting, which begins on Monday, May 22, 2017.

The seeming delay in signing the 2017 budget into law by Acting President Yemi Osinbajo, one full week after it was passed by the National Assembly, which also ordered Federal Government Ministries, Departments and Agencies (MDAs) to submit their 2017 budget proposals within two weeks. The structural reforms and fiscal impetus that is the second leg to accelerate the nation’s economic recovery comes with budget implementation, but the government seems in no hurry to sign the document and get implementation off the ground to achieve desired results, particularly as contained in the Economic Recovery and Growth Plan (ERGP). 

Despite the recent market rally, many equities are still under-priced especially in the banking and insurance sub-sectors, especially amidst expectations of improved 2017 numbers therefrom as revealed in their Q1 earnings reports. Also, there are opportunities in other sectors like services, consumer goods and petroleum, especially with the likely rebound in crude oil prices to impact their bottom-lines and expected improvement in the purchasing power of Nigerian as inflation seem to be declining.

Meanwhile, the composite NSE All-Share Index for the week shed 79.08 points to close at the week at 28,113.38 points, from an opening figure of 28,192.46 points, representing a 0.28% decline on above average weekly traded volume but lower when compared to previous week’s level, halting the two-week of bullish run. Similarly, market capitalisation for the period closed lower at N9.72tr, from an opening value of N9.75tr, representing a 0.27% decline in investor’s portfolio.

The advancers’ table for the week was dominated by low cap stocks as investors took medium and long term positions in anticipation of improved numbers from such companies and another bull rally that will influence general market direction. The recovery economy is expected to impact market fundamentals positively.

The mix price performance for the period slowed down the year-to-date return position of the NSE’s All Share Index to 4.61%, just as market capitalisation growth YTD stood at N472.05bn, representing a 5.10% gain from the year’s opening value.

Market breadth for the week was weak and flat as the number of advancers were equal to decliners, in the ratio of 30:31 on high volume of trades that were a mix of profit booking and repositioning, amidst the declining demand for stocks as the market entered another phase of decline that may not take very long. This is true, especially with early signs of economic recovery becoming evident and the expected March full-year earnings reports that will kick off very soon.

Meanwhile, stock markets around the world were mixed over the past week to close lower, despite the up and down movement in oil prices amidst the ongoing political confusion that followed President Donald Trump's sudden dismissal of former Federal Bureau of Investigations (FBI) chief, James Comey last week which sparked political turmoil leading ultimately to Wall Street's biggest sell-off in over eight months. However, the Justice Department's appointment of ex-FBI Director Robert Mueller as special counsel to lead the team investigating alleged ties between Russia and Trump's election campaign appears to soothe investor concerns but supported Wall Street.Apart from these issues, recent economic indicators suggest the economy is continuing to grow. Industrial production came in at a higher than expected 1% gain in April, while jobless claims remained at record lows.

Japan’s Nikkei, Germany‘s DAX and US Indexes were down for the week, while  Britain’s FTSE 100 was up on market forces, despite what seems the anti-business promises made by Theresa May, UK’s Prime Minister in her party manifesto.

In Asia, China reported poor spending and activity data that caused concerns, but the government hinted that it might implement new stimulus.

In Europe, the Eurozone economy posted 0.5% growth rate during the first quarter which exceeded the US but remains weaker than many expected.

Back home, the benchmark index opened the week on a negative note, losing 2.41%, which was reversed  on Tuesday with gain of 0.35% that were sustained on   Wednesday, Thursday  and the last trading day with 1.05%, 0.72% and 0.04% respectively to pull the week back marginally with 0.28% loss, on mixed investors sentiments.

The composite All-Share index and all sectoral indices for the period were down,except the NSE Premium, NSE Main Board, NSE Banking, NSE Insurance and the NSE Pension indices that were up while the NSE ASeM Index closed flat.

The week’s transaction, measured by aggregate volume and value were mixed as volume traded dropped by 30.37% to 2.27bn shares from 3.26bn units in the preceding week, while value for the period went up by 13.60% to N32.65bn from N28.74bn last week. 

During the week, the share prices of Dangote Cement, UACN, Okomu Oil and BOC Gases were adjusted for dividend recommended by their directors. PharmaDeko released its first quarter earnings reports.

May & Baker and Linkage Assurance led the advancers’ log for the week, gaining 14.84% and 11.54% respectively to close at N1.47 and N0.58, driven by low price attraction and market forces, while the flip side was topped by Newrest ASL  and C& I Leasing  which suffered 13.22% and 11.84% slide to close at N4.07 and N0.67 each respectively.

Market Outlook                   

The outlook for this week is mixed as profit booking and portfolio repositioning ahead of March year-end earnings reports continue, expectation of MPC meeting outcome after the two-day deliberations. Also, investors expect the presidency to sign the 2017 budget to kick off implementation of its ERGP.

Again, the time to combine data and chart pattern for your trading decisions is now, to enable you know the support and the resistance levels.

Train yourself and study to know the new approach to adopt at this point and going forward, get your comprehensive short term trading pack. 

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