MARKET UPDATE FOR OCTOBER 26, 2017

INVESTORS UNDERTAKE MONTH-END PORTFOLIO RE-BALANCING, CRUNCH EMERGING ECONOMIC, COMPANY DATA

Nigeria’s stock market on Thursday had a sloppy, but mixed session that continued to be highly volatile owing to month-end activities as investors watch out for economic date for direction. The mixed session was also despite the influx of more impressive earnings reports, as market indicators closed lower as traders booked profit after the few day of relatively weak rally, while cashing out capital gains in some stocks that had appreciated so far in this season.

The market, nonetheless, remained within the bullish channel and above 20DMA but on a border line of breaking down the lower line of the channel and the moving average which will be a function of market forces this morning as trading opens. Should the earnings surprises continue and more of better numbers are released the bearish sentiment that reached 61% on Thursday would expectedly change.

Thursday started out with a move down right after the opening session, and then the index bounced around throughout the rest of the session in red, with the magnitude of loss only reducing in the last minutes of the day to end the trading session. The losses suffered by blue chip companies served as the force that slowdown the recovery mode of the market, as the index moved between an intraday high of 36,640.07 and low of 36,438.60 to finished lower than its opening figure.

The market’s technicals were weak and mixed as bearish sentiments approaches 61% to reveal selling pressure while volume index was 1.42 for the day, and buying position at 39% and 61% selling volume of the day’s total transaction, to halt the two day up market on a negative market breadth.

As the earnings reporting season draws to a close, it has been observed that the numbers emanating are beating market expectation, which is a signal of  another bullish ascendancy  ahead as market players interpret and digest the numbers to rebalance their portfolios and  market  revaluation, especially with the positive macro-economic data, rising oil price at the international market, which is expected to further boost Nigeria’s external reserve  amidst noticeable increase in foreign exchange inflows, on the back of a relative stable exchange rate regime and implementation of Ease of Doing Business to make the country much more investor friendly, despite security challenges in some parts of the country.

 It is also noteworthy that the Federal Government, on Thursday approved a Road Tax Fund (RTF), which is primarily aimed at attracting private sector investments into that critical sector of the economy, thereby easing pressure on the annual federal budget. Under the scheme, private companies, either as a single entity, or a group of companies using a Special Purpose Vehicle (SPV) can use tax that would have been paid to government to fix a road with design provided and construction supervised by the Federal Ministry of Power, Works and Housing. The project must also have a five-year guarantee (READ MORE). The Federal Executive Council, also on Thursday, approved the 2018 spending plan, which would be unveiled to the leadership of the National Assembly next Tuesday (October 31, 2017) at a dinner, as part of efforts to enhance understanding and buy-in that would facilitate easy passage of the document, thereby ensuring that it does not linger of the shelves until June, like the current one.

Meanwhile, the All Share Index shed 105.37 basis points to close at 36,517.48 from 36,622.85 points, which represented a 0.29% decline. In the same direction, market capitalisation for the day dropped by N36.47bn to N12.64bn, representing 0.29% value loss from previous session’s N12.68tr.
Price depreciation suffered by medium and high cap stocks like CCNN, PZ, NB, Guaranty Trust Bank, UBA, Forte Oil, International Breweries and Mobil impacted negatively  on the ASI’s year-to-date return, as investors begin to react to their seeming lower than expected numbers. These reduced the year-to-date gain of the All-Share index to 35.88%, just as market capitalisation growth dropped to N3.4tr YTD, representing a 36.68% rise above the year’s opening value.

Market breadth for the day turned negative as the number of decliners outnumbered advancers in the ratio of 27:19 on a high traded volume that was higher than previous day’s level to short-live two day of bull run on the exchange.

Market activities, in terms of volume and value were mixed as volume rose by 10.47% to 356.81m shares from the previous day 323m units, while value for the day dropped by 9.44% to N4.22bn from N4.66bn a day earlier.
Transactions in the shares of UBA, Fidelity Bank, Custodian Allied Insurance, FCMB and Access Bank topped the volume chart.

At the close of the trading session, National Salt topped the advancers’ table, gaining 10.18%, to close at N16.77 per share, on the back of its impressive Q3 numbers, followed by Dangote Flour Mills with 10.13%, which was on market expectation of the company Q3 earnings report.
On the flipside, Forte Oil, again came under attack on it mixed numbers, losing 5.00% to close at N40.30 on market forces, while NEM Insurance shed 5.00% to close at N1.33 on profit taking; followed by International Breweries, which shed 4.99% to close at N51.78 per unit on profit taking, despite the company’s expected Q2 result even as it seems the market may have started reacting based on the numbers put forward by NB, a major competitor in the sector.

Also, during the trading session, Total Nigeria and NB announced interim dividend of N3.00 and N1.00 respectively, as Stanbic IBTC, FBNH, Dangote Sugar, Cadbury, Julius Berger and Access Bank, among others released their Q3 earnings  to the market.

TODAY’S OUTLOOK

As the market opens this morning, volatility may continue in the midst of repositioning and profit taking, being the last trading day of the week at the peak of earnings reporting season, were more companies are expected to release their numbers.
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 moving up and down amidst improving company, economic and market fundamentals.

It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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CRO | Investdata Consulting Ltd
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