MARKET UPDATE FOR JUNE 21, 2017
The Nigeria stock market was down
throughout the mid-week trading session as selling pressure hit the market on massive
profit taking and reaction to the Morgan Stanley Capital International (MSCI)
Frontier Index’s to put Nigeria under consideration for a ”Standalone”
re-classification until November. This
part of seeing whether the Central Bank of Nigeria (CBN) can sustain funding of
its recently introduced import and export Fx window as it has repeatedly
assured. This delay can also be seen from the angle of the fact that the
unstable price of oil at the international market may hinder the apex bank’s continued
intervention, given that the commodity is Nigeria’s major source of revenue, a
situation that could negatively impact its external reserve and subsequently
liquidity level in the foreign exchange market.
So far, the
Central Bank of Nigeria (CBN) has in the last five months demonstrated its
commitment and readiness to meet the supply side of the forex market, seeing
the impact on economic recovery so far.
It must
however be noted that factors which helped Nigeria’s stock market to this level of
being a leader in African, gauged by return on investment are still very much in
intact- strong company and economic fundamentals, as well as the hope that
implementation of the 2017 budget, leading to more liquidity. Wednesday’s drop
in Nigeria’s stock market indicators, just as INVESTDATA has repeatedly warned,must
therefore be viewed against the fact that profit taking is an integral part of any
stock market, meaning that if you are in good stocks before this pullback don’t
panic and if you are in cash, HOLD to watch the next trend especially as the Q2
earnings is around the corner. Investors must also note that a slide in prices
of stocks also offers new investors opportunity to take position in them, hence
it is normal and should be expected.
Investors and
analysts expect the implementation of the 2017 budget to positively impact the
economy, with government borrowing to fund infrastructure development and
further boost economic fundamentals and support businesses. The $300m bond that
was oversubscribed and the recent World Bank approval of $961m are expected to also
support the Federal Government in the implementation of its Economic Recovery and
Growth Plan (ERGP), if faithfully utilized.
Meanwhile, the composite index, on
Wednesday, NSEASI shed 897.71
basis points to close at 33,477.89 after opening at 34,370.60 points,
representing a 2.61% decline on huge volume traded that was higher, when
compared to previous day’s transaction level. Volume index was 0.96 with a
buying position of 8%, while selling volume was 92% of the total transactions
for the day. Market capitalisation for the day was down N311.06bn to close at
N11.58tr from an opening value of N11.89tr, representing 2.61% depreciation in
investors’ portfolio.
The downturn recorded for the day was
impacted by losses suffered by highly capitalized stocks to reduce All-Share
index’s year-to-date return to 25.30%. Also, market capitalisation for the same
period stood at N2.33tr, representing a 25.94% appreciation above the year’s
opening value.
Market
breadth for the day was negative as the number of decliners outweighed
advancers in the ratio of 37:13 on huge volume of trade to halt the five
straight days of bull-run.
Market
activities in terms of volume and value were up by 29.70% and 51.09%
respectively to 508.73mshares from previous day’s 392.27m, and N6.40 from
previous day value of N4.22bn. Transactions in the shares of ZENITH BANK,
FIDELITY BANK, GUARANTY TRUST BANK, DIAMOND BANK and UBA topped the volume
chart to close the day’s trade.
At
the end of trading, Neimeth topped the advancers’ log with its share price
gaining 9.09% to close at N0.84 each on impact of government new policy on
healthcare, just as its Q3 numbers are expected in the market, added to the
factor of its low price attraction. It was followed by Conoil Oil 4.99% gain to
close at N40.42per share, as investors reacted to the release of its 2016
full-year financials and the offer ofN3.10 dividend per share from Earnings Per
Share of N4.09.
On
the flipside, PZ and Skye Bank led the decliners’ log, dropping 5.00% apiece to
close at N20.90 and N0.76 respectively on profit taking, while Cadbury followed
with 4.98% to close at N13.54 each on
profit taking.
TODAY’S OUTLOOK
As
the market opens this morning, expect mixed action of profit taking and MSCI
decision to on Nigeria, as repositioning in value stocks continue. Investors
should not panic on pullbacks if they have taken 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 looking up ahead of recovery economic fundamentals, if the numbers
will support the price reversal or continuation.
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
recovering. For stocks that should be on your shopping list to buy in this up
market or pullback sign up for investdata buy & sell signal setup by
calling 08032055467.
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