NIGERIA STOCK EXCHANGE: TRADING REMAINS VOLATILE AMID PROFIT TAKING, POSITIONING IN INTERIM DIV STOCKS

MARKET UPDATE FOR AUGUST 24, 2017

It was yet another negative trading session on the floor of the Nigerian Stock Exchange on Thursday. The day opened with a big gap down as the index bounced back to resistance, but could not get through, following which it pulled back down, but was unable to get through support either. Basically, with a triple test of support, the market tried to bounce by afternoon. Selling pressure was higher than buying,despite the impressive half-year earnings reports of first tier banks with interim dividend. The profit booking at this point indicates that traders had factored in these numbers posted into the share prices of the banks. This state is not likely to endure as the strong numbers from the banks will attract attention before the closures of their books and afterwards. This is particularly important as many of the banks are still selling at a discount to Book Value with high margin of safety.

Another high point of Thursday’s trading session was the scooping shares of Guaranty Trust Bank, Zenith Bank and Nestle Nigeria by investors. While 71m units of GTBank worth N2.89bn were exchange (mostly crossed deals) at N41 each as foreign funds exchanged shares in off-market deals; followed by 14m shares of Zenith Bank that changed hands at N23 per share; while 250,000 shares of Nestle were crossed at N1,220.

The negative market sentiment on Thursday was revealed by the volume traded index of 0.72 as buying position for the day stood at 7%, while selling volume was 93% of total transaction to reversed the positive trend of the previous day’s on low volume and negative market breadth. This was despite the impressive numbers half-year numbers posted by Ecobank Transnational Incorporated (READ) and United Bank for Africa (READ). UBA announced a 20 kobo interim dividend (just like last year) which seemed in line with investing public expectation, while corporate earnings from Stanbic IBTC and Fidelity Bank are still being expected.

Meanwhile, the benchmark NSE All Share Index shed 483.35 basis points to close at 36,575.86 point, from its 37,059.21 points opening level, representing a 1.30% decline on a low volume traded, when compared to the previous day. Similarly, market capitalisation dropped by N166.6bn to close at N12.61tr, from an opening value of N12.77tr, also representing a 1.3% value loss in investors’ portfolios, following losses suffered by high cap stocks. As a result, the ASI’s year-to-date returns dropped to 36.10%, just as market capitalisation stood at N3.36tr within the period, representing 36.33% above the year’s opening value.

Market breadth for the day remained negative as decliners outweighed advancers in the ratio of 21:18 on a low volume of trades to short-lived the two day up market.

Trading activities in terms of volume and value were down marginally by 9.89% and 0.72% respectively at 238.16m shares, worth N5.49bn, as against previous day’s 264.29m units, valued at N5.53bn.

Also, transactions in the shares of Guaranty Trust Bank, Access Bank, UBA, Zenith Bank and FBNH topped the volume chart.

At the end of the day’s trading session, UBN topped the advancers’ table, gaining 5.08% to close at N6.00 each on market forces and positive Q2 numbers, despite the proposed primary activity by way of right issue. It was followed by Neimeth with a 5.06% gain at N0.83 per share, on market forces.

On the flipside, petroleum marketing giant- MRS lost 5.02% to close at N29.07per share on profit taking and sectorial trend as many stocks in the industry suffered losses, ahead of Custodian Allied Insurance that slide 5.00% to close at N3.42 per unit on profit taking after mark down for 10 kobo dividend.

TODAY’S OUTLOOK

Being the last trading day of the week, expect further volatility to continue today amidst profit taking and accumulation of interim dividend paying stocks as  half year results continue to hit the market. 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