MARKET VOLATILITY MAY CONTINUE, AS INVESTORS AWAIT 2017 BUDGET IMPLEMENTATION

MARKET UPDATE FOR JUNE 13, 2017

Nigeria’s stock market indices had a negative session on Tuesday as the downside followed through on a continued profit taking and cautious trading ahead of Q2 earnings reporting season and inflation figure for the month of May.

The day started out with a gap down which was resisted at the mid-day trading hour, rising slightly to close the day lower.  The negative sentiment revealed a volume index of 0.85 with buying position of 29%, while selling volume was 71% of the total volume traded for the day. This is also an indication that investor appetite for risk seems to have declined even as the Central Bank of Nigeria announced plans to raise N22 billion for the Federal Government in three months.

This is a seeming crowding out of the private sector from the financial market as we have always said, especially with the Federal Government savings bond running on a monthly basis. All these help to increase domestic debt as the Government struggles to increase its much needed revenue. Investors and traders took profit from positions earlier taken in banking and petroleum marketing stocks as was evident in the drop recorded in both sectoral indices.

Despite the expected hike in interest rate at the end of Fed meeting on Wednesday, stock markets around the world were mixed to close higher, irrespective of the gradual signal that the emergency level of monetary stimulus is exiting the global economy and market. As the market also look to the outcome of other central banks’ meetings slated for this period, the Bank of England, Bank of Japan and others. 

Meanwhile, the NSE benchmark All Share index yesterday shed 93.43 basis points to close at 33,141.85, after opening at 33,235.28 points, representing a 0.28% decline on a high volume traded. It was however lower when compared to previous day’s transaction level.Similarly Market capitalisation for the day was down by N29.07bn to close at N11.46tr, from an opening value of N11.49tr, representing 0.28% value loss. 

The downturn in the share prices of medium and high cap stocks pulled back the All-Share index’s year-to-date return to 23.32%, while growth in market capitalisation for the same period stood at N2.21tr, representing a 23.94% rise above the year’s opening value.

Market breadth for the day was positive as the number of advancers outnumbered decliners in the ratio of 31:28 on high volume of trade to continue the two-day down market.  

Market activities in terms of volume and value were down by 18.13% and 9.64% respectively to 410.22m shares from previous day’s 501.08m shares and N5.55bn from the previous day’s N6.11bn. Transactions in the shares of ZENITH BANK, FCMB, DIAMOND BANK, FBNH and TRANSCORP topped the volume chart to close the day’s trade.

At the end of the trading, May & Baker topped the advancers’ log with its share price gaining 9.94% to close at N3.43per share, on impact of the Memorandum of Understanding (MoU) with the government to produce vaccine. It was followed by Transcorp with a 9.64% gain to close at N1.82 per share, against the backdrop of the impact of reforms in the power sector and the company’s expansion of capacity to generate more power to national grid.

On the flipside, Forte Oil led the decliners’ log, after dropping 9.57% to close at N58 on the back of expected dilution as the company announced approval to source additional fund, besides profit taking activities, while Cadbury  followed with 7.87% to close at N14.40 each on profit taking.

Also, United Bank for Africa’s oversubscribed$500m Eurobond continued to excite investors, being an indication of confidence in the bank’s board and management, especially being the  bank’s first of such offering. In a bulletin sent to the NSE, the bank announced it has raised $500million. The bond which was rated by Fitch and S&P as stable was issued at a coupon rate of 7.75% and will mature in June 2022 will be listed on the Irish Stock Exchange.

OUTLOOK

As the market opens this morning, expect mixed action of profit taking may sustain volatility, amidst profit taking and repositioning in value stocks, especially as investors await the implementation of the 2017 Budget signed into law on Monday by Acting President Yemi Osinbajo, ahead of the release of May inflation figures. All things considered, investors should not panic on the recurrent pullbacks 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 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. Invest wisely and sign up for investdata buy & sell signal setup.

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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- Abiola Rasaq, 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