MARKET UPDATE FOR JULY 25, 2017
Nigeria’s stock market indices had a
strong bull-run Tuesday with a gap up at the opening, as they formed
consolidation patterns in the early hours, held support, and then had a strong
midday rally. The index made much progress in the last few hours to consolidate
with nice gains and moved higher on high demand for stocks with traders and
investors taking last minutes positioning as the market continued to react
positively to the impressive numbers released so far by quoted companies.
Meanwhile, despite the decision of
the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to leave the
benchmark Monetary Policy Rate (MPR) unchanged at 14%, at the end of its
two-day meeting which ended on Tuesday, the continued appreciation of the Naira
and improved liquidity in the foreign exchange market has supported inflow of
the greenback into the economy and indeed the equity market. This has so far
also impacted positively on economic data, such that the CBN is saying it is
early in the day to ease monetary policy on the back of the much expected fiscal
reforms, structural changes and delayed implementation of the 2017 budget,
which now threatens the much expected economic recovery. The Federal Government must
therefore at this point brace up to the nation’s economic challenges and do the
needful to sustain the recovery pace. One way of doing this would be to put the
right policies in place to drive the administration’s much celebrated Economic
Recovery & Growth Plan.
Also, with the proposed Federal Government promissory note to local
contractors expected to reduce high debt that is now slowing down execution of
many projects across the country because banks are not ready to give these
contractors facilities any more. With these notes, contractors will have access
to fresh funds, knowing that the government will not disappoint in terms of
redemption of the promissory note at maturity.
The day’s volume traded index was 1.41; buying position, 93% and selling
volume, 7% of the total transaction. The sectoral indexes were higher as
investors and traders took position in different sectors with expectation of
their Q2 scorecards.
The composite NSEAll-Share Index gained 880.48 basis points to
breakout its two-year psychological line of 35,000 on a huge volume to close at
35,533.00 from an opening figure of 34,652.52 points, representing a 2.54%
growth, while volume transacted for the day was higher than previous day’s.
Similarly, market capitalisation went up by N303.35bn to close at N12.25 trillion
from the opening value of N12.02tr, representing a 2.54% growth to wipe away
two-year loss position in investor’s portfolio as the market continue recovery move.
The upturn in share prices of Nestle, UBA, Forte Oil, Okomu Oil,
Zenith Bank, Access Bank, Stanbic IBTC, Dangote Cement, Presco,Oando, Lafarge
Africa, Flourmils and others
boosted the All-Share index year-to-date
returns to 32.20%. Also, market capitalisation over the same period improved by
N3.01tr, representing a 32.68% growth over the year’s opening value.
Market breadth on Tuesday was positive as the number of advancers
outweighed the decliners in the ratio of 27:18 on a huge volume of trade to
continue the 14 straight days of bullish trading. Market activities in terms of
volume and value were upby 74.79% and 49.32% respectively at 513.45mshares worth
N5.90bn, from the previous day’s 293.75m units valued at N3.95bn.
Transactions in the shares of UBA, Access Bank, Zenith Bank, Fidelity
Bank and Transcorptopped the volume chart to close the day’s session.
At the end of trading activities, UBA topped the advancers’ log,
gaining 10.16% to close at N10.41 each on the back of its expected Q2 numbers
and brighter prospects as it consolidates operations in various Africa countries.
It was followed by May&Baker with a 10% gain to close at N3.19 per share,
on market forces and expected impact of government policy on the health sector
to influence its numbers going forward.
On the flipside, Unity Bank led the decliners’ log after dropping
8.96% to close at N0.61 on profit taking activities of investors and traders, ahead
of Morison’s 8.92% decline to close at
N1.43per unit on market forces as this company has been inactive on the
exchange.
TODAY’S OUTLOOK
As trading opens this morning, the market is expected to
continue riding on the prospect of more Q2 numbers being released amidst countdown
to the end of this earnings season. Already, investors and traders have reacted
to the mixed numbers released so far, receiving positively to surprises, while treating disappointing earnings
otherwise.
However, it is advisable to expect a blend of surprises and
disappointment from the companies reporting their numbers, even as investors need
not panic if any pullback occurs now due to profit booking, if they have taken position based on strong
numbers and future prospects of any stock. You should therefore fix your 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
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