MARKET UPDATE FOR WEEK ENDED JULY 14 AND OUTLOOK FOR JULY 17-21, 2017

MIXED WEEK AHEAD, AMIDST EXPECTED INFLATION DATA, EARNINGS REPORT, BUDGET HOPES

Nigeria’s equity market was bullish last week, recording five straight days of up-market on the back of increasing demand for stocks, especially banking stocks that largely boosted performance for the period and in the process reversed previous week’s pullback. The index,after a healthy rally within the period, consolidated to form a double top which is the first resistance at 33,261.66 points, the same as the June 29 level of 33,269.84. This is likely to break out if the earnings reporting season beat market expectation to keep the trending momentum up as the index had crossed the psychological line of 33,000 within the week.

The NSE Banking index for the period gained 6.1%, outperforming the composite All Share index through the week. Meanwhile, the sector responded to traders’ profit taking activities on Friday when it surrendered 0.21%. The effect of the move was clear as sentiment around resistant level was obvious while momentum slowed down, waiting for a push which the expected Q2 numbers will do if corporate performance remain impressive to surpass expectation.

The banking sub sector still remains one to watch by traders, since it remains the most active with good volume that provides liquidity, allowing for taking and exiting from positions at any time. In any case, the sector accounts for the highest number of companies that pay interim dividend.If the pull back seen on Friday continues on Monday, the gap will provide another opportunity for positioning, especially if you are in cash, a situation we expect traders to capitalize on. Please understand that one major attraction to this sector is the expected half year financials and consistent dividend payment by majority of stocks in the sector.  On the strength of the impressive first quarter performance from the sector, most traders have already heightened their expectations.

The volume index for the week under review was 0.94 with buying position at 95% and 5% selling volume of the total transaction as investors and traders continued their last minutes repositioning ahead of the Q2 numbers and inflation figure for June.

At the close of activities for the week on Friday, the benchmark Index gained 802.49 points to close at 33,261.66 points, from an opening figure of 32,459.17 points, representing a 2.50% growth on a high volume of transactions. The retracement of the market above 33,000 on a weekly time frame supported the daily uptrend that signaled investors’ sentiments for positive numbers.

Similarly, market capitalisation for the week closed higher at N11.46tr from an opening value of N11.19tr, representing a 2.47% value gain that boosted investors’ portfolios for the period.

The week’s top performance table was dominated by mixed class of stocks, rangingfrom low, medium to high cap stocks, reflecting a buy market after forming double bottom earlier.

Within the period, price upturn in shares pushedthe NSEASI’s year-to-date return to 23.77%, just as that of market capitalisation appreciated toN1.22tr, representing a 23.98% gain from the year’s opening value.

Market breadth for the period was positive and strong with the number of advancers outweighing that of decliners  in the ratio of 48:27 on a high volume of trades to reflect  positive investors sentiment.

Global stock markets also closed higher in the past week, as oil prices in the international market were up while the dollar is weakening against major currencies. 

Japan’s Nikkei,Germany‘s DAX, Britain’s FTSE 100 and U.S market indexes were up.TheU.S. indexes moved up on testimony of the chairperson of Fed to the effect that the economy is not in danger of overheating, but that inflation remained stubbornly low and the pace of monetary tightening would remain gradual. Also, economic indicators released during week were mixed with the retail sales declining on unexpected 0.2% and industrial production posting a better-than-expected 0.4% increase, boosted by the mining sector. In Europe, the economic recovery will likely be accelerated during the second quarter according to a business survey. The improvement could spark the European Central Bank to consider reducing stimulus measures, but inflation has remained surprisingly weak.

In Asia, the Chinese economy would maintain steady and improving momentum during the second half of this year despite all hurdles. The Bank of Japan (BOJ) offered its most upbeat assessment of the country in over a decade and plans to maintain a loose monetary policy until inflation surfaces.

Back home, the All-Share Index opened the week on a positive note, rising 0.17%, which was sustained during the week on increasing magnitude of gains. It however declined on Friday due to profit taking to record marginal gain of 0.04%. As the week had a bullish transition to close higher with 2.50%.

The All-Share and other sectoral indexes for the period were up to close the week, except the NSE ASeM closed flat.

The week’s activities, measured by aggregate volume and value were up by 19.81% and 13.74% respectively to 1.27bn from the previous week’s 1.06bn units, worth N13.99bn, compared to previous week’s N12.3bn.

During the week also, the share price of Conoil was adjusted for the dividend recommended by theboard, while Unilever and United Capital Plc released their Q2 results to the market, with many other companies release their closed period.

At the end of last week’s trading, Neimeth and Unity Bank topped the advancers table with a gain of 24.62% and 19.67% respectively,closing at N0.81 and N0.73 respectively, driven by market forces and low price attraction on expectation of their Q2 numbers. The decliners’ log was led by Conoil and University Press, which lost 17.43% and 14.12% of the week’s opening price to close at N29.98 and N2.92 each owing tothe price adjustment/activities of market forces and weak earningsrespectively.

Market Outlook                   

The market is expected to be mixed this week as more companies release their numbers ahead of the implementation of the 2017 budget which is reportedly still being adjusted. Expectations are thatthe budget would boost economy recovery, even as the Economic Report of the Central Bank of Nigeria (CBN) for the month May, released last weekend, indicated that federally collected revenue has been lagging behind the 2017 budget estimates on a monthly basis, especially non-oil revenue. Also, the National Bureau of Statistics would on Monday (July 17, 2017) release inflation data for the month of June, which analysts expects would follow the trend of a gradual decline for the fifth consecutive month year-to-date.

Bearing all these in mind,investors should position in stages in value stocks with high upside potentials, despite their current prices 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,

Join our WEBINAR every Friday 8pm to 9pm and for our WhatsApp group/to get market updates, SMS web*name*email to 08124050850. To register for Investdata Buy and Sell Signal Setup call 08032055467

As the market enters the peak period of earnings reporting season for the half-year financial performance watch out for equities with December financial year end. We believed that, those with second quarter cash dividend history will attract more patronage from intelligent investors. In other words, such equities stand a higher chance of improving your portfolio during the season.
Consequently, we have carefully selected few of such equities for your timely investment guide. Please understand that using the information side-by-side the 2017 three-month financial positions will increase the probability of success.

Let the Table in the attached guide you.