CAUTION, AMIDST WATCH FOR MARKET REACTION TO COURT RULING ON $800M TSA REFUND ON BANKING STOCKS

MARKET UPDATE FOR JULY 20, 2017

Trading on the floor the Nigeria Stock Exchange (NSE) on Thursday recorded a relatively big gain compared to other days since the week began to continue an 11- day uptrend, despite volatile session during which its benchmark All-Share index touched an intraday high of 33,702.61 and then a low of 33,435.98 before closing the session higher at 33,695.83.

The index fell as the market opened and moved up in the mid session strongly,a move that was consolidated again by the afternoon. The market trailed a little, but it was a solid session, although there was low volume of trade.

Sentiments in the market were positive as demand for stocks were high as more impressive Q2 numbers are being released. Earnings reports released during trading included the impressive Q2 numbers of Lafarge Africa which moved from a loss in the corresponding period of 2016 to profit of N19.19bn;and mixed numbers for the same period from Transcorp Hotel. 

The volume traded index for the day was 0.50 as buying position had 97%, while selling volume was 3% of the total transaction. The NSE Insurance index closed in red as short-term players took profit as long-term investors who see growth potentials wait for earnings to confirm the sector position.

The banking and petroleum marketing indexes on Thursday remained positive as investors continued to buy into stocks within these sectors likely to pay Q2 interim dividend, even as the board of United Bank for Africa, one of the stocks on investors’ radar, at their meeting approved the earnings report and payment of dividend, while awaiting Central Bank of Nigeria (CBN) approval before notifying the exchange.

Stock markets around the world were mixed to close higher, despite the continued fluctuation of oil price and dwindling value of the U.S$, following the outcome of meetings of the Bank of Japan (BOJ) and the European Central Bank (ECB), both of which have assumed the responsibility of sustaining global liquidity. This as we know, keeps stock and real estate markets on the rise, even as rates drop lower or stable.  Given the little progress made on the pro-growth Donald Trump policy front, the offset for rising Fed interest rates has been Quantitative Easing in Europe and Japan. 

Meanwhile, the benchmark ASI gained 180.90 basis points on Thursday to close at 33,695.83 after opening at 33,514.93 points, representing a 0.54% growth on low transaction volume that was lower than previous day’s. Similarly, market capitalisation rose by N62.35bn to close at N11.61tr from an opening value of N11.55tr, representing a 0.54% growth in the worth of investor’s portfolio.

Price appreciation in the shares of medium and high cap stocks impacted the All-Share index to boost year-to-date returns to 25.38%. Also, market capitalisation over the same period improved by N2.37tr, representing a 26% growth over the year’s opening value.

Market breadth for the day was positive and strong as the number of advancers outnumbered decliners in the ratio of 29:19 on a low volume of trade to continue the 11-day bull-run.  Market transaction in terms of volume and value were down by 42.24% and 32.76% respectively at 191.43 million shares worth N2.18bn, from the previous day’s 331.43m units valued at N3.24bn.

Transactions in the shares of Prestige, Guaranty Trust Bank, FBNH, Zenith Bank and Transcorp topped the volume chart to close the day’s trade.

At the end of the day’s trading activities, Nemeith topped the advancers’ log, gaining 9.52% to close at N0.92 each on expectation of its Q3 numbers and impact of the Federal Government’s policy on the sector.It was followed by Skye Bank with a 9.52% gain to close at N0.69 per share, on market forces and extension CBN guaranty, added to its recovery of N60bn from its pool of toxic loans. 

On the flipside, 7-Up led the decliners’ log after dropping 4.99% to close at N90.20 on profit taking activities of investors and traders; ahead of Vitafoam’s 4.99% decline to close at N2.56per unit on market forces.

TODAY’S OUTLOOK

As trading opens this morning, expect mixed performance as market to react to Lagos High Court judgement that banks should return $793m to the Federal Government’s Treasury SingleAccount (TSA) with the CBN. Thereafter, the banks affected: United Bank for Africa, Diamond Bank, Skye Bank, First Bank, Fidelity Bank, Keystone Bank and Sterling Bank are to appear before the court on August 8 to explain why they had withheld the funds.

Before then, the management of Sterling Bank, on Thursday, denied reports alleging that it is hideously keeping huge sums allegedly belonging to the National Petroleum Investment Management Services (NAPIMS) and Nigerian Petroleum Development Company (NPDC).

In a statement by Henry Bassey, its Chief Marketing Officer, Brand Management & Communications Group, denied that it failed to remit the sum of $46.5m to a designated Federal Government Asset Recovery Account with the CBN.The amount supposedly represents undisclosed qualifying funds under the TSA policy illegally kept by NAPIMS and NPDC.

“We wish to state unequivocally that Sterling Bank does not hold any sum in any currency as a deposit from either of these entities.

“We have therefore written formally to the Office of the Accountant General of the Federation (AGF) demanding a clarification of this claim and a correction in the interest of the general public,” the bank added.

Meanwhile, more companies have continued to release their Q2 numbers as the earnings reporting season enters its peak. Investors should not panic on the pullbacks if they have taken position based on strong numbers and future prospects of any stock, but fix their gaze on the actual numbers and bail out when expectations are not met, thereby cutting their loss.

Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year’s trading activities, especially now that prices of stocks are looking up ahead of the improving 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.

Be reminded once more 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 oscillating market or pullbacks sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

Meanwhile, we say a very big THANK YOU to all participants that made the INVESTDATA workshop a huge success, even as stocks recommended during the workshop continue to rally and activities in the various sectors identified as those to invest in this second half of 2017 are looking up and promising to lead the rest of the year in performance and returns.

To book for the WORKSHOP VIDEO and SOFT COPIES of WORKSHOP MATERIALS send YES to 08028164085 and 08111811223.

MR. OMORDION AMBROSE

CHIEF RESEARCH OFFICER

INVESTDATA CONSULTING LIMITED

ambroseconsultants@yahoo.com

Phone 08028164085, 08032055467

NSEASI DAILY TIME FRAME CHART

Market position