MARKET UPDATE FOR WEEK ENDED JULY 21 AND OUTLOOK FOR JULY 24-28
Nigeria’s equity market last week closed strong and positive to
continue its bullish run that was driven by positive economic data and
impressive numbers emanating from the manufacturing sector, especially Unilever’s
local arm, Lafarge Africa, Honeywell and Flour Mills,while stocks in the financial
services sector that have so far published their results revealed mixed
performance. In particular, insurance companies have so far remained dominant
among those making their numbers available to the Nigerian Stock Exchange (NSE)
earlier this season than before.
Those stocks that have so far presented their half-year score-cards
include: NEM, Guinea Insurance, Lasaco and United Capital, Wema Bank. In the
past week, Africa Prudential has presented an impressive half year report which
beat market expectations.
Another booster of the NSE’s bull-run is news of plans by the Federal
Government to listits assets on the exchange to further deepen the market and
raise funds needed to support its infrastructural development drive.
Market performance on the last trading day of last week was particularly
strong, emerging the highest gain for the period as banking stocks were in high
demand ahead of their interim dividend declaration, which does not seem capable
of being blighted by last week’s court ruling that United Bank for Africa,
Diamond Bank, Skye Bank, First Bank, Fidelity Bank, Keystone Bank and Sterling
Bank should return about $793m to the Federal Government’s Treasury Single
Account (TSA) with the CBN. The banks have continued to react since the ruling
insisting on their innocence. Besides Sterling Bank, United Bank for Africa, on
Friday said it “has fully remitted all NNPC/NLNG dollar deposits since
August 24, 2016.”
It emphasized in the statement “that none of such funds are currently
in the bank’s books,” this, it continued, has been “further corroborated by a
clearance memo published by CBN on its website on same date.”
Such news or court ruling, where not properly managed, it is believed,
is capable of deflating the confidence that is gradually returning to the
economy and stock market.
Also, INVESTDATA believes that if the Federal Government is really ready
to achieve its Economic Recovery Growth Plan (ERGP),there must be a change in the
style of implementing the budget, especially that of 2017, just as it must manage
information among the three arms of government to ensure that the desired
rebound of the economy from recession is not truncated by actions or statements
from any arm or agency of government.
The recent refund of second tranche of the Paris club deduction to
state governments is expected to further boost the economy with many of the
state governments using the money to settle backlog of salaries thereby
strengthening disposable income among the citizenry.
The volume index for the week under review was 1.14 with buying
position at 98% and 2% selling volume of the total transaction as investors and
traders continued their repositioning ahead of the statutory deadline for
quoted companies to release their Q2 numbers as well as the meeting of the
CBN’s Monetary Policy Committee(MPC).
The benchmark Index for the week gained 758.71 points to close at
33,261.66 points, from an opening figure of 33,261.66 points, representing a
2.30% growth on a huge volume of transactions to breakout the psychological
line of 34,000 again to confirm a healthy trendy market. With the positive
momentum ahead of the last full week of earnings reporting season the
possibility of breaking out the recent market high of 34,384.70 is high to
continue the recovery move of the market ahead of improving economic
fundamentals.
In the same vein, market capitalisation for the period closed higher at N11.73tr from
an opening value of N11.46tr, representing a 2.28% appreciation in investors’
position.
The best performing stocks table for the period was dominated
by low and medium cap stocks, as investors and traders took advantage of
pullbacks in the stocks to position so as to ride with the rallying market,
particularly when their Q2 numbers are yet to be released.
The upturn
in share prices for the week pushed the NSEASI’s year-to-date return to 26.59%,
just as market capitalisation appreciated by N2.57tr,
representing a 26.98% gain from the year’s opening value.
Market
breadth for the period was positive with the number of advancers outpacing
decliners in the ratio of 36:33 on a huge volume of trades to reflect buying a market
with expectation.
Stock markets
around the world were mixed as crude oil price fluctuation continued,
especially on the back of meetings of the Bank of Japan (BOJ) and the European
Central Bank (ECB) during the week, with both officially assuming the responsibility
of sustaining global liquidity. 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.
Japan’s
Nikkei and Britain’s FTSE 100 for the period recorded growth, while Germany‘s
DAXand U.S market indexes were mixed to close lower. TheU.S. market indexes were
mixed despite the good numbers of positive economic indicators that were
release within the period, especially housing stars that rebounded to 1.215m in
June. Jobless claims came lower than expected at 233,000 last week, while the
index leading economic indicators posted better than expected 0.6% gain last
month. All these gains and improvement were offset by falling crude oil prices
that hurt the energy sector, amidst the rising political risk that threatens
lofty valuations.
In
Europe, investors are concerned that the zone’s growth may be at risk again
after on unexpected decline in consumer confidence. The upshot is that the
first quarter deficit fell to a 10 year low which means public finance is
improving. In Asia, the Chinese economy
is projected to grow 6.6% in 2017which exceeds government’s target despite
policy curbs. The Bank of Japan (BOJ) offered its most upbeat assessment of the
country in over a decade and plans to maintain its Quantitative Easing as loose
monetary policy, until inflation surfaces.
Back
home, the All-Share Index opened the week on a positive note, rising 0.12%,
which was sustained during the week on the rising magnitude of gains. As Friday
trading session had the highest gain of 0.98% to close the week higher with 2.30%.
The
All-Share and other sectoral indexes for the period closed the week in green, except
for NSE Insurance that was in red with 2.81% due to mark down and profit
booking from the sector, while NSE ASeM closed flat.
The
week’s activities, measured by aggregate volume and value, were up by 185.83%
and 149.39% respectively to 3.63bn from the previous week’s 1.27bn units, worth N34.89bn,
compared to previous week’s N13.99bn.
During the week also, 10 quarterly earnings reports and two full
year numbers were made available to the market.
At the end of last week’s trading, Skye Bank topped the advancers
table with a gain of 19.69% to close at N0.73, driven by market forces, based
on news of the extension of the CBN lifeline and recovery of N60bn toxic loans.
It was followed by Unilever Nigeria’s 16.12% gain to close at N38.32 on the impressive
Q2 numbers released last week. The decliners’ logon the other hand was led by
AXA Mansard Insurance and AG Leventis, which lost 8.97% and 7.69% to close at
N2.03 and N0.72 each owing to profit taking.
Market Outlook
The market is expected to be mixed this week as more companies release
their numbers ahead of the deadline of July 31 and profit taking from the
current uptrend. Also,it is the week of the MPC meeting and expectations are
that the committee will maintain its policy stance, expecting fiscal
authorities to up their games to support the economic recovery and usher in
growth by implementing the 2017 budget in the manner that Nigerians will feel the
impact.
Bearing all these in mind,investors should position in stages in value
stocks with high upside potentials, despite their current prices on the
exchange.
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