POSITIVE DATA TO RESCUE, AS NIGERIA’S BOURSE IN CORRECTION MODE

MARKET UPDATE FOR JUNE 6

Market sentiments among the investing public on the floor of the Nigerian Stock Exchange were mixed on Tuesday as trading closed in the red to halt eight straight trading sessions of bull-run, a situation attributed to profit booking by players after many equity prices had hit new highs repeatedly in the recent rally. The pullback was on a huge volume as revealed by volume index of 1.75 with a buying position of 29%, while selling volume was 71% of the day’s total transactions.

As mentioned in INVESTDATA’s update for Monday that pullback was imminent on Tuesday, despite the up market on the first trading day of the week, because pullback or profit-taking is an essential part of stock market fundamentals which is also a characteristic of a recovering market.

The correction phrase of the market is not expected to last for too long, especially considering the ongoing economic recovery and improving business environment.The recent Purchasing Managers Index for May at 52.5 from the 51.1 recorded in April, according data released by Central Bank of Nigeria (CBN). This, at the same time indicates that the manufacturing sector is looking up especially with the improvement in the foreign exchange market, as the CBN continues to meet the supply side of the market, with the Naira appreciating against the dollar, especially in the back market from its peak of N520/$ in February to N374, representing almost 40% improvement over the period. Also the earnings reporting season is around the corner for March-year end and half-year scorecards, even as the market and the economy awaits the signing of 2017 budget into law by the executive.

Also on Tuesday, the World Bank Group, on Tuesday published its June 2017 Global Economic Prospects Report, noting the firming but fragile recovery in the world’s economy to 2.7% this year, up from 2.4% in 2016, while Nigeria’s economy is projected to grow by a modest 1.2%, before galloping to 2.5% in 2018 and 2019. Help for Nigeria, the report said, is expected to come from a rebound in oil production, at a time she continues to enjoy exemption from the Organisation Petroleum Exporting Countries (OPEC) output cut after years of minimal production arising from trouble in the oil bearing Niger Delta region. The World Bank noted also the improved security in the oil producing region and the increased fiscal spending especially on capital projects by the Federal Government.

Meanwhile, the NSE’s composite All-Share index shed 378 basis points to close at 32,200.38, after opening at 32,578.38 points, representing a 1.16% decline, although volume traded remained huge on bearish sentiments and higher when compared to previous day’s transaction level. Similarly, market capitalisation fell by N130.68bn to close at N11.13tr, from an opening value of N11.26tr, representing a 1.16% loss in value.

The downturn in share prices of Dangote Cement, Mobil, Unilever, Conoil, Guaranty Trust Bank, Zenith Bank and FBNH impacted the All-Share index negatively to reduce  year-to-date return to 19.82%, while market capitalisation for same period stood at N1.88tr, representing 20.38% appreciation above the year’s opening value.

Market breadth for Tuesday was positive as the number of advancers outpaced decliners in the ratio of 38:22 on huge volume of trade to halt the bullish transition.

Market activities in terms of volume and value were mixed as transactions were up by 16.36% to 744.99m shares from previous day’s 640.24m units while value went down by 15.10% to N6.52bn, compared to previous day’s N7.68bn. Trades in the shares of DIAMOND BANK, FIDELITY BANK, FCMB, ACCESS BANK, AND FBNH topped the volume chart to close the day’s trade.

At the end of the day’s trading session also, Sterling Bank topped the advancers’ table with its share price gaining 9.76% to close at N0.90per share, on market forces. It was followed by May& Baker with a 9.58% gain to close at N2.15 per share against the backdrop of the expected impact of the MoU with the Federal Government, which expected to positively impact top and bottom line.

On the flipside, Mobil Nigeria led the decliners’ table, dropping 9.75% to close at N288.56 also on profit taking; while NPF Micro Finance followed with 5% to close at N1.33 each on profit taking.

As market opens this morning, expect mixed action of profit taking and repositioning in value stocks to continue, which 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 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 and the upcoming Traders & Investors workshop call 08032055467 and 08111811223

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