MARKET UPDATE FOR WEEK ENDED DECEMBER 8 AND OUTLOOK FOR DEC 11-15, 2017

THOUGH PROFIT TAKERS LURK, INFLOW OF FUNDS POWER EQUITY PRICES HIGHER IN SANTA CLAUS RALLY

The benchmark index of the Nigerian Stock Exchange over the past week was bullish with the consumer goods and banking indexes outperforming the general market, due to increased demand for equities of these sectors as a result of their impressive numbers, confidence in their management teams and adherence to good corporate governance that continues to attract inflows from domestic institutional and foreign investors alike. There is also attention focused on stocks that are likely to increase dividend payout in 2018 for the 2017 financial year which is gradually but surely winding down.

The inflow of funds to the equities market is not unexpected, given the fact that rates in the money market are on the downward swing in recent times, given also the intra-market moves seen in the last eight days with the gradual drop in interest rates on money market instruments. This is despite the fact that the benchmark Monetary Policy Rate (MPR) remains at 14%, which fueled the volume of trades seen last week, resulting in three consecutive weeks of up market. This is a sign that the bull transition is still alive, despite the profit taking that halted the seven days of bull rampage, looking at the market breadth at this point, using the cumulative AD line which takes the difference between the number of advancing and declining issues each day, and adding the result to the previous day’s value. 

In a healthy market, you want to see the market breadth either tracking or leading the index, such that periods where market breadth lags and diverge from index, it is a red flag for analysts and discerning investors.

For example, in the chart above, the NSE All-Share index’s action has formed a double bottom chart pattern that supports uptrend and the orange line, which is the cumulative A/D Line over the last four years. Could the index movement and orange line be any more similar in direction? Based on this measure at least, market internals remain healthy for now, as market forces in the new week determine the next direction.

Market technicalities for the period under view were good as buying pressure was 77% and selling positions stood at 23%, the week’s volume index was 1.91 of total transaction. The year’s resistance level was broken out on a weekly high of 39,656.53 to remain above the psychological line of 39,000 point from the low of 37, 913.99 basis points. At the same time, the index formed a double bottom chart pattern on a rising channel that supports continuation or reversal of current trend with year-end round the corner. Market breadth was positive and widened to reflect the value gain of equities.

The  All-Share index for the period  gained 1,312.93 points to close at 39,257.53 points, from an opening figure of 37, 944.60 points, representing a 3.46% growth on a higher volume of transactions that were driven by financial services and conglomerates.   

Market capitalisation for the period closed higher at N13.67tr from the opening value of N13.22tr, representing a 3.46% appreciation in investors’ positions, with low and medium cap stocks dominating the advancers’ log as a result of their high upside potentials and low price attraction, considering impressive numbers of quoted companies as more banking stocks feature on the table.

The rally was due to inter market fund movement and inflows from foreign players positioning in the   low, medium and high cap stocks that parade improving numbers, which positively lifted the NSE ASI’s year-to-date return to 46.08%, while growth in market capitalisation for the period jumped to N4.27tr trillion, representing a 48.18% gain from the year’s opening value.

Market breadth for the week was positive with advancers’ outnumbering decliners in the ratio of 47:20 on a high volume of trades that were lower than previous week’s.

International markets over the past week were marginally positive as investors expressed concerns over the rising threat from North Korea, as well as the slow-down in investing activities amidst positive global economic data.

In U.S, equities were mixed irrespective of their better-than-expected number, as non-farm payrolls rose to 228,000 which was better than the estimated 190,000; while average hourly earnings rose to 0.2% for a 2.5% annual pace; whereas the Eurozone economy expanded by 0.6% in Q3, pointing to a stronger than expected year.

In Asia, Japan’s economy also expanded at 2.5% annual pace for Q3, even as the relative improvement in oil price boosted activities in many economies of the world as reflected in the Q3 GDP data released recently around the globe.

Back home, the NSE opened the week on a positive note with marginal gain of 0.08% to consolidate the previous trading session’s up market, which was sustained on Tuesday with improved gain of 1.37% that continued to the midweek and Thursday when the benchmark index gained 1.51%, and 1.17% respectively. It was however halted on Friday as traders and investors booked profit to slow down the rally as the index succumbed to pressure, losing 0.70% in the process to the close the week 3.46% better.  

The composite NSE index and sectoral indices closed higher for the period, except for the NSE Oil/Gas,  NSE ASeM and NSE Industrial that fell by 0.47%,1.04% and 1.37% respectively to close the week. 

Market transaction for the week, in terms of volume and value, were mixed as volume fell by 76.72% to 3.32bn shares, up from the previous week’s 14.26bn units, while value climbed marginally by 3.96% to N36.45bn, from previous week’s N35.06bn.

The best performing stock for the week was FBN Holding, which hit a new 52-week high, after gaining 26.33% to close at N9.02, while Cadbury rebounded on market sentiment to close at N15.90, gaining 22.87% to top the advancers table on the strength of market forces.   

The worst performing equity for the period was Total Nigeria, which lost 5.39% as its share price was adjusted for the interim dividend of N3.00 per share, closing at N228.01; followed by 5.37% slide in the price of International Breweries to close at N56.78 per share with investors and traders taking profit in reaction to its unimpressive Q2 numbers, as the company consolidates the recent gains arising from the recent fusion with its unlisted sister companies. 

During the week also, Flour mills submitted an application to NSE for approval its right issue, while UBN listed additional shares of 51,299,322 units as a result of its (LTTIP) Long term Transformation Incentive Plan, and 7-Up released details of its Scheme of Arrangement to minority shareholders

Market Outlook
This week, expect a continuation of the volatility, as funds are searching for better opportunity in the financial market and profit taking in  the mix of  portfolio re-positioning as seasonal changes influence stock prices amidst the volley of positive economic data.
However, one thing that remains very clear in the current market situation is: Smart investors are accumulating and enhancing their positions in selected stocks.

Again, we advise that investors allow numbers to guide their decisions while re-positioning for the rest of the year trading activities, especially now that prices of stocks are oscillating 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.

Investing in the stock market is in phases. You must know this in order to manage your trading and investment risk. For stocks that should be on your shopping list to buy in this end of the year and ahead of 2018 full year earnings season, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467 or text Signal.

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