MARKET UPDATE FOR WEEK ENDED SEPT 22 AND OUTLOOK FOR 25-29, 2017





EQUITY INVESTORS LOOK TO MPC OUTCOME AHEAD OF MONTH, YEAR-END PORTFOLIO REBALANCING


Trading activities on the Nigerian Stock Exchange in the past week remained highly volatile and mixed but closed higher on improved technicals that supported Friday’s breakout of the downtrend line to confirm the very short term rally that would continue this week, depending however on the outcome of the two-day meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) which ends on Tuesday.
The index on a weekly time frame is still relatively weak since it is still trading below its downtrend line, but signaled a breakout on improved volume that indicates increasing buying pressure ahead of third quarter’s end and Q3 earnings season in October, which also would indicate how traders are repositioning for end of the year trading activities.
The improvement in market breadth after turning positive in the last two trading session has strengthened market technicals with relatively high volume that confirms recovery on mixed sentiments. There is noticeable increased buying pressure that shows a gradual return of speculators who are determined to play the year’s remaining earnings season, which is likely to support uptrend reversal in no distant time. This would however depend on the ability of the monetary and fiscal authorities to take actions capable of sustaining the fragile economic growth recorded in Q2, beginning with the outcome of the MPC meeting, which analysts, in any case, expected would support what the CBN had done so far to drive the recovery that brought about the positive GDP in Q2 2017.

However, month and quarter-end window dressing by fund managers may influence prices. 
The volume index for the period under review was 0.72, with buying position at 100% and 0% selling volume of the total transaction as volatility continued. The composite NSE All Share Index gained 483.24 points to close at 35,488.81points on Friday, from an opening figure of 35,005.57 points, representing a 1.38% growth on a high volume of transactions. The index hit an intra-week high of 35,490.84 and low of 34,729.78 before retracing to close above the psychological line of 35,000. 
Similarly, market capitalisation for the period closed higher at N12.23tr from an opening value of N12.07tr, representing a 1.37% value gained in investors’ portfolios to reduce losses suffered recently.
Top performing stocks that dominated the advancers log for the week were low caps while few highly capitalized stocks that had pulled back before now are attracting attention on the strength of their strong fundamentals and expected third quarter earnings reports.
The upturn experienced during the period is attributable to gradual speculative activities of traders, especially with the third quarter earnings season around the corner, as they reposition in medium and high cap stocks, thereby lifting the NSEASI’s year-to-date return to 32.05%, just as market capitalisation for the period increased to N2.99tr, representing a 32.31% gain from the year’s opening value.

Market breadth was however negative as the decliners outnumbering advancers in the ratio of 35:25 on a high volume of trades that reflect investors’ repositioning ahead of portfolio rebalancing ahead of Q3 season by fund managers.
The Nigerian stock market went the way of markets across the world to close higher over the past week, despite another around of panic created by sanctions imposed on North Korea over its recent missile launch by the UN, worsened by the war of words between Pyongyang and Washington. There was a strengthening of the U.S Dollar after the Feds meeting during the period left interest rate unchanged, which resulted in the breakout of oil price above $50 per barrel, amidst geopolitical security threats that seem to be a concern for investors. This is also especially as central banks around the globe are coming out with different monetary tighten measures.

Japan’s Nikkei, Germany‘s DAX, Britain’s FTSE 100 and U.S market indexes closed north, despite the Feds’ warnings of a likely increase in rates once more by year end, irrespective of low the prevailing inflation rates. The central banks also warned that it would reduce its $4.2tr balance sheet, citing low unemployment, business investment growth and economic expansion. However, inflation remains a key concern among investors and central bank officials.
In Europe, the highly watched IHS Mar-kit survey found that economic activity rose to a four month high in September, which could spur the ECB to take action on ease of QE.
In Asia, S&P Global Ratings downgraded China’s sovereign credit rating, amidst worries that credit growth continues to move too quickly, despite efforts to curb lending activities.
Back home, the composite NSE Index opened the week on a negative note, losing 0.38% which continued on the second trading session with marginal loss of 0.08%, before reversing at the midweek’s trading when it chalked 1.04%. This was however short-lived, as the indicators closed south again the following day, with a marginal loss of 0.05%. On Friday, the indicators recorded a relatively bigger gain of 0.85%, bringing total gained for the week to 1.38%, thereby halting previous week’s down market.

The All-Share Index and sectoral indices for the period also closed higher, except for the NSE Consumer Goods and NSE Oil/Gas that faced the opposite directions, losing 0.23% and 3.05% respectively, while NSE AseM was flat to close the week.
The week’s activities, measured by aggregate volume and value, were up by 22.68% and 16.20% respectively, as investors crossed 1.10bn shares worth N17.86bn, as against previous week’s 896.62m units valued at N15.37bn in the previous week.
At the end of the week’s trading, Linkage Assurance topped the advancers’ table, gaining 11.86% to close at N0.66 per share on the back of market forces, followed by Continental Reinsurance’s 9.79% notch to close at N1.57each on market forces and expectations for its Q3 numbers. The decliners’ table on the other hand was led by Nigeria Enamelware, which closed 16.65% lower at N23.23 on price adjustment for bonus of one ordinary share for every  five held. Caverton followed with a 9.17% drop to close at N1.09 per share on profit taking.
During the week also, Union Bank notified the exchange of its rights issue that opened, while Avon Crowncaps voluntarily delisted from the exchange.

Market Outlook
Technically, Nigeria’s stock market is still searching for direction, despite the improved technicals last week, until a breakout of the downtrend line, which confirms recovery.  
The volatility in the market is expected to continue as trading opens this week, amidst profit taking and repositioning ahead of MPC meeting decision on Tuesday, third quarter end, Q3 earnings season and year-end activities. We still hope that the Nigerian government would review its 2017 budget implementation strategy and put in place some fiscal measures that can help sustain the ongoing economic recovery to help drive down inflation numbers faster.

Investdata believes the Muhammadu Buhari administration should improve the living conditions of Nigerians by tackling the huge infrastructure deficit to enhance economic development.
One thing that is clear in the current market situation is that smart investors are using the ongoing correction to accumulate and enhance their positions in some stocks.
Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year 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, Plan to attend the Independent Day Free Investment Education Summit jointly organized by APT Securities & Funds Ltd/Investdata Consulting Ltd, because real independent is financial freedom.

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DATE: October 2. 2017
TIME: 10am – 2.00pm
VENUE: Ostra Hall & Hotel, Behind MKO Abiola Gardens, Opposite NNPC Gas Plant, CBD, Alausa, Ikeja. Lagos.

What you will learn at this the Independent Day free workshop:
1. The fundamentals of stock trading and investing
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Ambrose Omordion
CRO | Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08032055467

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