MARKET UPDATE FOR WEEK ENDED JUNE 9 AND OUTLOOK FOR JUNE 12-16, 2017

KEYING INTO VALUE STOCKS, AMIDST ANXIETY OVER OIL, UNSIGNED BUDGET 2017, INFLATION DATA,

The bullish momentum in the nation's equity market over the past weeks continued last week, propelled byan even stronger demand for stocks, despite profit taking on Tuesday and mixed sentiment within the period, to close higher on a huge volume of trade that revealed increasing investor confidence. The different classes of stocks that topped the week's price performance log shows that banking and petroleum stocks are driving the bullish market, a situation that is robbing off on other sectors and particularly low priced stocks. 

The ongoing recovery in the economy and improving macro-economic fundamentals that will support business expansion and growth are indications that this market rebound may last longer. This would however depend on whether managers of Nigeria's economy at this point are determined to do the needful, which as we have always said, will go a long way to support this current market rally. This is despite pockets of pull backs that will occur along the line, and draw backs like the failure of Acting President Yemi Osinbajo to sign the 2017 Budget passed four weeks ago by the National Assembly, without cogent explanations, seemingly confirming insinuations keeping the document until the return of President Muhammadu Buhari from his medical trip in the U.K.

There is a great paradox in the stock market difficult to believe. This is: That which seems too high and risky to the majority usually goes higher, and what seems low and cheap usually goes lower. But we often find investors both individuals and institutions avoiding buying a stock that is heading for a new high and preferring stocks that are coming down from their peak.  This is wrong, if you buy when the price of a stock looks high to majority of the conventional investors, chances are that you would sell after it moves substantially higher and begins to look attractive to some of these same conventional investors. As so often in life, what looks expensive may prove to be cheap and what looks cheap may prove to be overvalued. These are our thought for the week as stock prices hit new highs

Meanwhile, the composite NSE All-Share Index for the period gained 1,905.05 points to close at 33,276.68 points, from an opening figure of 31,371.63 points, representing a 6.07% growth on a huge volume of traded. This breakout of the rising channel is likely to take the market to psychological line of 35,000 before pulling back, despite profit taking, and then surpass the 37,000 level before the end of Q2 earnings season in July. The volume index for the period was 2.42 as buying position was 100%, while selling volume was 0%. In the same direction, market capitalisation for the week closed higher at N11.5tr from an opening value of N10.85tr representing a 6.07% value appreciation in the portfolios of investors.

The advancers’ log for the period was topped by a mixture of low, medium and high cap stocks as investors and traders rebalance their portfolio with stocks that are defensive and have good upside potentials. This is expected, as second quarter earnings reporting season draws closer.   

Galloping equity prices during the week further pushed the NSEASI's year-to-datereturn into green by 23.82%, just as market capitalisation has grown YTD by N2.85 trillion, representing 24.21% gain from the year’s opening value.

Market breadth for the period was positive and strong with the number of advancers outpacing that of decliners in the ratio of 59:21 on a huge volume of trades that were up. This was as a result of investors buying to position for March account  and interim dividend. Already, this earnings reporting season has kicked off with International Brewery releasing its full-year 2017 scorecard to the market.

Meanwhile, stock markets around the world were mixed over the past week, closing lower as crude oil price and the US Dollar declined amidst uncertainty fueled by the week's UK election and the fate of Ms. Theresa May, which is likely to affect many things in that country, especially the housing market and others.

Germany‘s DAX, Japan’s Nikkei, Britain’s FTSE 100   and US market indexes were down for the week. The U.S market indexes were mixed as tech stocks suffered losses to close the week lower amidst political crises arising from the sack of FBI chief, leading to investigations of the alleged unholy involvement of some international leaders, particularly Russian President Vladimir Putin, in the November 8, 2016 election that sent shock waves across Wall Street and stock prices decline.

In Europe, the British pound moved significantly lower after Prime Minster May failed to win a majority in parliament, despite calling for an early election. This uncertainty is likely to affect the housing market

In Asia, Japan's economic growth was revised down Thursday after an unexpected decline in inventories and private consumption, despite the GDP expansion by 0.3% in Q1. The annual growth rate was revised down to 1% from the initial reading of 2.2%.  The world’s third largest economy has seen rapid improvement over the past year after several quarters of worrying decline. The country's central bank- the Bank of Japan (BoJ), is likely to meet this week, with the possibility of leaving policy unchanged is high. 

Back home, the Nigerian Stock Exchange’s All-Share Index opened the trading week Monday on a positive note, with gain of 3.85%, which was short lived on Tuesday when it recorded a loss of 1.16%, but at the end of trading on Wednesday the market reversed up with a gain of 1.51%. As trading continued on Thursday and Friday to record gain of 0.77% and 1.03% respectively, pushing the ASI above the 33,000 level, bringing the week’s total gain to 6.07% on strong demand, supported by expectations.

The All-Share index and other sectoral indexes for the week closed the week higher, except for the NSEASeM Index that went down 1.74%, while NSE Insurance was flat to close the week.

Last week’s transaction, measured by aggregate volume and value were up by 33.62% and 22.55% respectively as investors traded 3.10bn shares, as against the 2.32bn units in the preceding week. Value for the period stood at N29.18bn, from N23.81bn a week earlier.

During the week also, the share price of Eterna was adjusted for dividend recommended by its directors, while International Brewery Plc released its full year 2017 earnings reports, with the directors not proposing a dividend after net profit fell by 61% when earnings rose 40%. The directors blamed the failure to propose a dividend on the fact that the Ilesha, Osun State SABMiller subsidiary is over geared.

May & Baker and  Cadbury   topped  the week's  advancers table  by gaining  58.66% and 43.89% respectively during the week to close at N2.84 and N15.67, driven by low price attraction and general market uptrend, while the flip side was topped by University Press  and Jaiz Bank , which suffered 9.66% and 7.69% slide to close at N3.46 and N0.84 each respectively.

Market Outlook                   

The market is likely to be mixed this week as a result of profit taking from three weeks uptrend and fear of oil price decline on a mono product economy like ours. Also March account earnings reports are expected to start hitting the market ahead of the release of inflation figures by the National Bureau of Statistics (NBS) this week.

Investors at this level of the market should position in stages in value stocks with high upside potential despite the current prices of stock on the exchange. 

Again, the time to combine company fundamental data and chart pattern for your trading and investing  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,

To join our webinar every Friday 8pm to 9pm, WhatsApp group and get market updates, SMS web*name*email to 08124050850

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Workshop on COMPREHENSIVE SHORT-TERM TRADING STRATGIES FOR REST OF THE YEAR & BEYOND

Sub Topics:

1. The Toolbox of Successful Traders & Technical Analysts- Mr Meshach Ukpoma, FX Analyst/Trader

2. Outlook and Implications of the 2017 Budget & Petroleum Industry Governance Bill (PIGB) on Nigeria’s Stock Market and Economy- AbiolaRasaq, Group Head Investor Relations, UBA

3. A Strategic Outlook; The Fusion of Fundamental & Technical Analysis- Ambrose Omordion, Chief Research Officer Investdata Consulting Ltd

4. Understanding Market Timing to Manage Risk, Using Technical Analysi-  Mr. Abdul-Rasheed  Momoh, Head, Capital Markets, TRW Stockbrokers Limited

The workshop holds on:

DATE: 24 June 2017

TIME: 9.00am

VENUE: Ostra Hall & Hotel, Behind MKO Abiola Gardens, Opposite NNPC Gas Plant, CBD, Alausa, Ikeja. Lagos.

The fee is N20, 000 per participant. Payment made a week before the date of the event attracts 10% discount. Companies sending more than two representatives would enjoy a 15% discount.  Payment should be made into: Zenith Bank; Account Name: InvestData Consulting Limited; Account Number: 1013033032.

For more enquiries about the programme, please call Ambrose on: 08032055467/08179547605 or Kingsley: 08111811223  

MR. OMORDION AMBROSE

CHIEF RESEARCH OFFICER

INVESTDATA CONSULTING LIMITED

ambroseconsultants@yahoo.com

TEL:01-4724645, 08028164085, 07028061501