MARKET UPDATE FOR DECEMBER 5,2017

SANTA CLAUS RALLY: INDICATORS SOAR AS PROFIT TAKING SLOWS DOWN, INVESTORS GO AFTER VALUE STOCKS

The stock market had a spectacular Tuesday, solidifying the bull transition as it broke out the year’s strong resistance level to a  new 52-week high on strong and positive technicals that revealed increasing demand for stocks as buying pressure outweighed the effects of ongoing profit taking activities leaving the bourse bullish on a primary short-term. The fantastic run up further strengthened the market’s standing as one of the best performing in the world and Africa, with its year-to-date return of 43.24%, at a time the globe markets hit an all-time high of $100tr worth according to a report by analysts at Morgan Stanley. 

The market opened on a little upside in the early hours of the session but  ran strongly in the mid-morning  to  the afternoon when it  reached the  intraday peak of 38,515.91 before  pulling back in the last minutes of the  trading session, but gently  from the 52 weeks high.

As mentioned in our update yesterday, the composite index strongly broke-out the psychological line of 38,000 to extend the five-wave trend on a huge volume of trades that suggests accumulation by smart money. This is not unexpected, given the strong fundamentals, but low valuation of companies listed on the exchange, and positive economic data which also reveal growth prospect. On the economic front, despite the cap on Nigeria’s output by the Organisation of Petroleum Exporting Countries (OPEC) to 1.8 million barrels per day, the rising oil price would definitely result in increased government revenue, following which the worry should now be how to maintain the fragile peace in the volatile Niger Delta region by actively engaging the people, thereby giving them a sense of belonging.

One way to achieve this is to faithfully undertake the modular refinery, among other projects, while investing in their well-being, thereby reducing the temptation to seek fabled greener pastures abroad. This is important, given that about 98% of the youths who either died in Libyan concentration camps or on the Mediterranean sea, while attempting to cross into Europe, are of Niger-Delta origin, particularly Edo and Delta States. Beyond these and with the highly unpredictable movement in oil price, it is important for government at all levels to significantly reduce wastage and plug leakages in the system, while focusing on projects that will boost the economic fundamentals and impact the living standard of Nigerians.

Meanwhile, Nigeria’s stock market volume index on Tuesday stood at 1.24, buying pressure was 96% and selling volume, 4% of the total transaction to continue the bull-run, an indication of positive sentiments during the day’s trading. This trend is likely to continue as institutional money flow is green and looking up, but there is need for caution, even as profit taking slows down with the market looking up. The NSE Oil/Gas and NSE Insurance were the day’s laggards, while other sectorial indexes closed on the same path as the All-Share index. 

The composite Index gained 519.85 basis points to close at 38,494.43, from the 37,974.58 points, representing a 1.37% growth, just as market capitalisation went up by N181.04bn to close at N13.41tr from previous day’s N13.23tr, representing a 1.37% appreciation in investors’ portfolio. The upturn was sustained by value gain in low, medium and high cap stocks like Dangote Cement, FBNH, Dangote Flour, PZ, UBA, Unilever, Dangote Sugar, NB, ETI, Access Bank, GTBank, Zenith Bank and Guinness Nigeria.  This impacted positively on the All-Share Index’s year-to-date returns, taking it to 43.24%, just as YTD growth in market capitalisation soared to N4.16tr, representing a 44.98% rise over the year’s opening value.

Market breadth on  was positive as the number of advancers  widened to outnumbered  decliners  in the ratio of 32:11on a high traded volume that was higher than previous day’s level. 

Transactions in terms of volume and value were up by 4.43% and 18.32% respectively to 522.35m shares worth N7.52bn from previous day’s 500.19m units valued at N6.36bn. The day’s activity was driven by Custodian Allied Insurance, GTBank, Fidelity Bank,Diamond Bank and Zenith Bank, which topped the volume chart.

The best performing stock for the day was Learn Africa, whichnotched 8.25% to close at N1.05 on market forces, followed by Cadbury Nigeria’s 7.37% to N15.30 on market sentiment.

On the flipside, Continental Reinsuranceshed 5% to close at N1.38 each on market forces and  profit taking, ahead of Chellaram’s4.94%loss to close at N3.04 each, on market forces.

TODAY’S OUTLOOK

Expect market volatility to linger as traders profit taking slows down, while investors goes for value stocks ahead of year-end and Santa Claus season amidst improving and positive economic data.

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 stock prices remain volatile 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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Ambrose Omordion
CRO | Investdata Consulting Ltd
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