MARKET UPDATE FOR SEPTEMBER 5, 2017

NEWS OF NIGERIA’S EXIT FROM RECESSION FAILS TO BUOY NSE INDICATORS, AS SEPT OPENS IN RED

The nation’s stock market opened the week and month of September lower after the long holidays, continuing a five-day downtrend that ended August negative as stocks recorded strong volatility despite news of Nigeria’s exit from economic recession technically following its positive Q2 GDP growth of 0.55%. This additional positive economic data, it seems, did not impact on the market as at end of Monday’s trading. The composite NSE All-Share index went south at the opening session, while in the last hour it snapped back a little to cut back the losses, which was not enough to change the market’s direction as it closed marginally lower. The low volume traded and the reversed market breadth to negative signaled cautious trading and investing on the first trading of the week given that the market had previously failed to responded positively to the impressive earnings that were released since mid-August.

The ongoing correction is a clear reflection that the market had earlier factored in the positive corporate earnings and economic data, following which investors and traders are playing safe at a time like this when the economy continues to stand on one leg- monetary authorities through the intervention of the Central Bank of Nigeria (CBN) in the FX market. This intervention, particularly its creation of the importer and exporter window has so far helped to relatively sustain the exchange rate of the Naira against other global currencies, besides enhancing liquidity in the market, attracting more inflow and impacting positively on the nation’s manufacturing sector and others as revealed by numbers and data.

It must be emphasized that there is palpable fear among investors and traders as to whether or not this trend would be sustained much longer, given that the fiscal authorities have since gone on a long slumber. This has resulted in the apparently poor implementation of the 2017 budget, which many had expected to significantly drive the much celebrated Economic Recovery & Growth Plan (ERGP) launched by the Federal Government in February, which seemingly accounts for the very negligible recovery in Nigeria’s 2017 Q2 GDP, a rate far slower than population growth. It is agreed even on the streets that what Nigerians desperately desire today is a robust job-led economic growth that would tackle the fast rising poverty in the land.

With another round of increased insecurity in the North East, poor road network across the country that continues to negatively impact movement of agricultural produces from the farm to the city centres, it was no surprise that unlike South Africa which also came out of recession after just two quarters, Nigeria’s agric GDP growth was retarded in the period under review. This government must move from the era of sloganeering to fixing the nation’s dilapidated road, rail and other critical infrastructure, by constructing some afresh and maintaining others to ease the pains of Nigerians. It is such that increases the cost of doing business, unemployment, as we gradually return to the era of multiple strike actions by various workers’ unions dissatisfied with the country’s present situation that has left so much to be desired. All of these contribute enormously to send negative signals to investors, inspiring fear and uncertainty in the land, thereby draining what is left of confidence in the government and its economic team.

Back to the market, selling pressure remained high at 71%, to support the down market as revealed by the volume traded index of 0.71, while buying volume was 29% of the day’s total transaction, as shown in the market breadth. 

Meanwhile, the benchmark NSE ASI shed 100.70 basis points on Tuesday to close at 35,403.92 point, from the 35,504.62 points opening level which represented 0.28% decline on a lower volume traded, when compared to previous session. Similarly, market capitalisation for dropped by N34.71bn to close at N12.2tr, from an opening value of N12.24tr, representing a 0.28% value loss in investors position.

The downturn in the share price of medium and high cap stocks during the session impacted negatively on the ASI’s year-to-date returns, reducing it to 31.74%, just as market capitalisation dropped to N2.96tr within the period, which left it at 31.97% above the year’s opening value.

Market breadth for the day was negative as the number of decliners outnumbered advancers in the ratio of 24:21 on a relatively low volume of trades to continue its five-day bear transition.

Market activities in terms were mixed as volume dropped 13.96% to 230.03m of shares as against previous day’s 266.51m units while  valued  was up at N4.77bn, as against the previous day’s N4.04bn.

Also, transaction in the shares of Access Bank, UBA, Zenith Bank, FBNH and Stanbic IBTC topped the volume chart.

At the close of the day’s trading session, C&I Leasing and NEM Insurance topped the advancers’ log, gaining 5.00% respectively to close at N1.05 apiece on market forces, followed by Guinness Nigeria with a 4.99% notch at N79.27 per share, as investors reacted positively to its audited result released during the day indicating a turnaround and return to profit, just as the offer of 64 kobo dividend per share.

On the flipside, Seplat lost 5% to close at N465.98 on profit taking, ahead of Julius Berger’s 4.99% to close at N30.87per unit on market forces. 

TODAY’S OUTLOOK

As trading open this morning, it’s expected that volatility will continue amidst profit booking and repositioning in expectation that the positive Q2 GDP will drive optimism in equity investment  ahead of Q3 earnings season and year end, even as we expect improved efforts from fiscal and monetary authorities to sustain the ongoing economic recovery.

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 at the moment.

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 down ahead of the improving economic fundamentals, amidst the wait for the Federal Government to complement initiatives of the monetary authorities needed to quicken Nigeria's economic recovery. It is time to use your technical tools to take decision by knowing the support and resistant level to reposition or exit any position.

Meanwhile, 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.

Get your home study pack today and ride with the current recovery on Nigeria’s stock market and economy. By investing and trading knowledgeable

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MR. OMORDION AMBROSE

CHIEF RESEARCH OFFICER

INVESTDATA CONSULTING LIMITED

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467