BUHARI’S RETURN FAILS TO INSPIRE INVESTORS AS NSE INDICATORS CONTINUE SOUTH

MARKET UPDATE FOR AUGUST 21, 2017

The week started with a volatile Monday on the Nigeria Stock Exchange (NSE) as the benchmark index witnessed some upside down actions, starting out with a side range, after which there was a slight drop in the morning hours, before a mid-day reversal when it started to rally. That was however before the NSE’s most capitalized equity- Dangote Cement (accounting for over 30% of market capitalisation) suffered a set-back, pulling back the index and thereafter came on again by afternoon to finish lower at the close of the day’s trading.

For some, the setback suffered by the indicators is a sign that investors and traders are not enthusiastic and have therefore not factored last Saturday’s return of President Muhammadu Buhari to the country after almost 105 days medical leave which began on May 7, 2017 into the mix. Reason, it was learnt, is that many are simply not expecting any significant changes in the fundamentals of an economy that continues to stand on a single leg- the monetary side or Central Bank of Nigeria (CBN) initiatives (particularly the foreign exchange market interventions). Issues that require urgent attention are by no means worrisome, beginning with a budget whose implementation remains a cause for concern to many, at a time when the Nigeria Extractive Industry Transparency Initiative (NEITI) says the nation’s three tiers of government are struggling to keep pace with implementation of the year’s spending plan, based on data it made provided in a new report on Monday. Also, given that the 2017 budget is expected to flag off implementation of the Economic Recovery and Growth Plan (ERGP) launched by this administration some months ago begins with this year’s budget, the government’s medium to long-term economic strategy may have been plunged into troubled waters.

The intraday market range broke out the psychological line of 37,000 to touch an intra-day high of 37,050 and low of 36,550.28 points before resting at 36,584.44 on a high volume with improved market breadth. The market came under high selling pressure as revealed by the day’s volume traded index of 1.09. Buying position stood at 93% selling volume of total transaction which was a reversal of previous day’s positive sentiments that supported the buy market.

Trading statistic on Monday revealed that foreign players transacted 3.5m units of Dangote Cement at N215 per share and Guaranty Trust Bank’s 29m units at N40.65 each. This suggest that foreign exchange is still flowing into the market on the strength of half-year corporate earnings that beat market and analyst expectations. This is seen as a signal to what is ahead if the government changes its poor implementation style and in the process supports the much desired economic recovery that is now being propelled by the monetary authority.

Ahead of the meeting of the Organisation of Petroleum Exporting Countries (OPEC) and as energy firms cut drilling rigs the most since January, U.S inventories fell about 13% from March highs to 466.5m barrels recently. Reduction in rig counts and falling inventory suggest that the market may be tightening, a situation that may also further support Friday’s oil rebound.

Meanwhile, the composite NSE All-Share index shed 336.12 basis points to close on Monday at 36,584.44 point, compared to the 36,920.56 points opening level, representing a 0.91% decline on a high volume traded, when compared to previous sessions. Similarly, market capitalisation went down by N115.85bn to close at N12.61tr, from an opening value of N12.73tr, representing a 0.91% value loss in investors’ portfolio.

The downturn in the share prices of Dangote Cement, Zenith Bank, UBA, Lafarge Africa, Dangote Sugar, FBNH, Nestle, CCNN and Stanbic IBTC, on Monday pulled back the ASI’s year-to-date returns to 36.13%, just as market capitalisation stood at N3.37tr within the period, representing 36.43% above the year’s opening value.

Market breadth for the day remained positive with the number of advancers outweighing decliners in the ratio of 27:16 on a high volume of trades to halt the two-day bull transition.

Trading activities in terms of volume and value were up by 55.68% and 30.35% respectively at 368.38m shares, worth N6.27bn, as against previous day’s 236.62m units, valued at N4.81bn.

Also, transactions in the shares of AIICO, Guaranty Trust Bank, Zenith Bank, UnityCapital and UBA topped the volume chart during the day, just as Flour Mills topped the advancers’ log, gaining 8.73% to close at N31.00 each on market forces. It was followed by Transcorp with a 5.97% gain at N1.42 per share, as investors continue reacting to its impressive 2017 Q2 numbers and the prospects of government becoming more serious in the ongoing power reforms.

On the flipside, Vitafoam lost 5% to close at N2.66 per share on profit taking; ahead of the 4.88% slide in the price of AXA Mansard Insurance to close at N1.95 per unit on profit taking and failure of its directors to pay interim dividend.

TODAY’S OUTLOOK

As trading activities open this morning, expect volatility to continue amidst profit taking and accumulation of interim dividend paying stocks ahead of their half year results, especially with the two first tier banks numbers giving insights into what should be expected. As investors also take advantage of correction to position for the rest of the year, if the much desired economic recovery becomes a reality despite the slow and unclear implementation of the 2017 budget by the government. Even so, the July inflation figures and Nigeria’s second quarter GDP data are being awaited from the Nigeria’s National Bureau of Statistics (NBS) to officially confirm economic state and direction.

However, investors need not panic if they take position based on strong numbers and future prospects of any stock. Since there is no bad news in the market.

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.

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, market timing are 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. Market is in phases know it in order to manage your trading and investing risk. 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.

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MR. OMORDION AMBROSE

CHIEF RESEARCH OFFICER

INVESTDATA CONSULTING LIMITED

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467