MARKET UPDATE FOR SEPTEMBER 7, 2017

NSE STOCKS SOAR HIGHER ON LIKELY REVALUATION, POSITION TAKING AHEAD OF Q3 NUMBERS

Trading on the Nigerian Stock Exchange on Thursday closed higher to consolidate the previous session rebound, despite the continued volatility that has forced investors and traders to the sidelines as they watch the market re-emerge from correction mode on the two-day bull transition. The index pulled back slightly shortly after market open, but retrace marginally by the afternoon and later bounced back significantly to breakout the psychological line of 36,000 and then hit an intraday high of 36,141.70 and low of 35,559.76 on a low volume traded. There was a noticeable high buying pressure of 95% as revealed by the volume index of 0.71, while selling volume was 5% of the day’s total transaction to support the up market.

Also, important is the fact that foreign investors continued to show interest in the consumer goods and the financial sectors, a situation which should  inspire interest as to what exactly mat be driving this class of investors and what they look at before jumping into any stock.  During the day’s trading also, 1.87m shares of Nestle Nigeria were crossed to a foreign investor at N1,220 per unit by a domestic investor. Guinness Nigeria continues to enjoy positive response to its recommendation of 64 kobo dividend per share, as well as its 2017 audited financials indicating a recovery from previous year’s loss before and after tax (READ). On the strength of this, the stock has so far recorded 22% gain since its result hit the market. This situation is however not playing out yet in the case of PZ Cussons, which also released its audited full-year result within the week, showing that net profit ballooned by 73.1% (READ), even as the market has not looked its way. It may not confirmed whether this is due to the decision of the board to still recommend a 50 kobo dividend just like prior year, despite the net profit jump. What happens to the share price in coming weeks would determine whether it is the outcome of investor dissatisfaction or the fact that they are still digesting the numbers.

Over the past four years, according to INVESTDATA Research findings, the market had closed the month of September in positive territory, except 2014. It is the last in the Q3 and first in the last four months of the year when investing and position taking are high in preparation for the October earnings season and ahead of the 2017 full-year results in 2018 for medium and long term investors. This is especially true, now that Nigeria’s market and economic fundamentals are looking up as reflected in the recent corporate earnings and positive economic data that should guide discerning investors to know where to invest for profitable returns in no distant if this growth and recovery tempo is sustained with good policies and action.

Meanwhile, the All Share Index gained 503.30 basis points on Thursday to close at 36,112.37 point, up from the 35,609.07 points opening level which represented 1.42% growth on a lower volume traded, when compared to previous session. Similarly, market capitalisation for the day further recovered N174.79bn to close at N12.45tr, from N12.27tr in the previous session, representing a 1.42% value gain to continue the two day bull transition. It also reduced losses suffered in the last two week by investors.

Price appreciation in the shares of the two most capitalized stocks Dangote Cement, Nigerian Breweries and others likes Guinness, Stanbic IBTC, Flourmills, Lafarge Africa, Guaranty Trust Bank and Dangote Sugar impacted positively to boost the ASI’s year-to-date returns to 34.37%, just as market capitalisation gains increased to N3.2tr within the period, representing a 34.62% rise above the year’s opening value.

Despite this, market breadth for the day remained slightly negative as the number of decliners outpaced advancers in the ratio of 22:19 on a relatively low volume of trades to sustain a two-day up market.

Market activities in terms of volume and value were down by 20.99% and 23.14% respectively to 222.69m shares, as against previous day’s 281.34m units valued at N4.17bn from the N5.42bn recorded in the previous session.

Transaction in the shares of Sterling Bank, Royal Exchange Insurance, Fidelity Bank, Access Bank and Zenith Bank topped the volume chart.

At the close of the day’s trading session, Guinness Nigeria topped the advancers’ log, gaining 10.23%, closing at N96.33 per share, as investors reacted positively to its full-year audited result released during the day. It was followed by Dangote Cement with a 4.73% notch at N216.91 per share, on positive market sentiments and expectation that government’s infrastructural development projection as contained in the 2017 budget may further boost its numbers in the coming months of the year.

On the flipside, Seplat lost 5.00% to close at N457.90 on a profit taking, followed by NCR that shed 4.91% to close at N6.97 per unit on market forces.  

TODAY’S OUTLOOK

Technically, the market closed mix on Thursday, but volatility is likely to continue as market opens this morning amidst profit booking and repositioning in hope that the positive macro-economic indices will drive optimism in equity investments ahead of Q3 earnings season and year end, while we expect the Nigerian government to review its 2017 budget implementation strategy and put in place some fiscal measures that will help the monetary authorities to sustain the ongoing economic recovery as shown by the positive but fragile GDP, to make growth and development a reality.

However, investors need not panic if they take position based on strong numbers and future prospects of any stock as the news of the nation’s exit from economic recession is a plus for 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 down amidst improving economic and market 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.

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.

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