MARKET UPDATE MAY 10, 2017

N273.24BN MID-WEEK GAIN BYMARKET CAP TURNSNIGERIA’S BOURSE GREEN

Trading on the floor of the Nigerian Stock Exchange (NSE) on Wednesday was by all standards an exciting one for investors and market players, many of who smiled to the bank due to the rally recorded by the market, an unprecedented one in a very long while, which helped to continue the nine-day upward movements as the bulls went on rampage. 

The composite All-Share index  recorded the it highest gain in a single day so far this year with  790.47 basis points to close mid-week’s trading session at 27,546.68 points, from an opening figure of 26,756.21 points. This represented a 2.95% growth on a very huge volume traded, which was higher when compared to previous day’s number. Similarly, market capitalisation for the day went up significantly by N273.26bn to N9.52tr from an opening value of N9.25tr, representing also a2.95% appreciation in investors’ portfolio.

Market sentiment remains positive as investors continue to take positions in low, medium and high cap stocks to reflect the return of liquidity and some measure of confidence on the strength of low valuations. 

This is a further indication that the investing community has renewed interest in the market as local and offshore investors return on positive sentiment, having digested the Q1’17 earnings of companies released so far. Meanwhile, there is hope for a rebound in economic activities as reflected in the data so far released such as inflation for the month of March, which is expected to improve further by the time April figures are published by the National Bureau of Statistics (NBS) in the coming days; even as the National Assembly promised to pass the much awaited 2017 Budget into law today Thursday, May 11, 2017, before closing for the week. Another signal of improvement in the macro-economic environment today, besides the projections of the World Bank and International Monetary Fund (IMF) that Nigeria would be out of the economic recession this year and thereafter begin a slow growth, was the positive Purchasing Managers Index (PMI) readings for the month of April, which peaked at an all-time 58, besides the Central Bank of Nigeria (CBN) persistent interventions that has greatly helped to improve liquidity in the nation’s FX market. 

The IMF upgraded its economic outlook for Africa and Nigeria as a result of the stable improvement in oil output from the Niger Delta where considerable peace has been restored. Also, if the National Assembly approves the 2017 budget as promised, despite the delay so far, it could quicken economic recovery. This is however would be largely dependent on implementation style of the government and focus on capital projects that will drive economic growth, given that, in our judgment, 2016 budget execution was poor, which was why its impact was not felt significantly down the economic ladder. Proper implementation of the 2017 budget will also help to improve the business environment and drive down operating costs for many companies.   

Meanwhile, the value upturn in highly capitalized stocks further impacted the All-Share index, bringing year- to-date positive positionto 2.50%, while market capitalisation for same period improved to N275.37bn, representing 2.98% above the year’s opening value.

Market breadth for the day remained positive and strong, but widened as the number of advancers outweighed decliners in the ratio of 50:9on a very high volume of trade that signals that the end of the rally is near. Also, Wednesday’s volume index was at 2.05, while buying position was 83% and selling volume 17% of the day’s total

Market activities in volume and value were up by 8.32% and 100.35% respectively to 584.12m, shares, up from previous day’s 539.28mshares, while value rose powerfully to N5.65bn, doubleprevious day’s N2.82bn. 

Transactions in the shares of UBA, DIAMOND BANK, ZENITH BANK, ACCESS BANK and Flourmills Nigeria 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 thatdropped by 0.99% at the end of the day’s trading. 

At the end of the day, Oando topped the advancers’ table, with its share price rising by10.13% to close at N9.57 on the activities of market forces; followed by Nahco Aviance with 9.93% to close at N3.32each on the back of the interplay of market forces and its proposed dividend of 22kobo per share.

On the flip side, Lafarge Africaled the decliners’ table, losing 4.99% to close at N46.68 purely on market forces; followed by Newrest ASL, which dropped4.83% to close at N4.73 on profit taking.

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 re-position 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 for the rest of the year.

Once more an 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.

Technically, the market’s uptrend continued yesterday on a very high volume that supported positive market breadth on high stock prices. Market sentiments remain positive on improving company fundamentals as revealed by recent numbers emanating from the listed companies, especially the Q1 earnings reports and positive economic data that continue to drive high demand for stocks.

Nonetheless, the NSE’s trending ability and direction is strong as ADX is above 20, reading 24.36; 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 80.62 which in at the overbought region to close the day’s trade. The candlestick formation pattern at the upper band of Bollinger signals imminent reversal of the market trend, as traders start cashing out.  Be careful when taking position at this point unless in value stocks with medium and long term perspective. As smart money makes last minutes effort to move price higher in this recovery phase of the market, investors should take stage profit before the party is over at level. 

NSEASI DAILY TIME FRAME