DANGCEM, GTB HIT NEW ALL-TIME HIGHS, AS NIGERIA’S MARKET BREAKS INTO 5-YEAR RESISTANCE LEVEL

MARKET UPDATE FOR JANUARY 16

Nigeria’s stock market resumed its upswing full-blast on Tuesday after few days of dramatic volatility interesting reactions to the demand and supply pull. The composite index started off with a big gap up that was sustained during the mid-morning into the afternoon session and closed higher, breaking out its five-year resistance level to confirm a new bullish long trend that comes with profit taking here and there till it hits 52,000 mark, to be supported by the oncoming earnings reporting season with strong institutional money flow index turning up again after little slow down as a result of profit booking last Friday. The buying pressure for the rest of Tuesday was extremely sharp at 100% as two highly capitalised stocks: Guaranty Trust Bank and Dangote Cement hit a new all-time high at N51 and N260, just as the NSE Banking index hit new five years highs of 599.28 after touching 601.15 point same day.

The market’s rebound at the beginning of the week follows strong accumulation by smart money as reflected on positive market technical, with volume traded and market breadth remaining strong at 100% positioning and volume index at 1.04 of the day’s total transaction. It was a day of big reversal that consolidated Monday’s move, which looks good.

Funds have continued flowing into Nigeria’s stock market due to its juicy year-to-date return of 15.20%, which is almost at a par with the inflation rate for December 2017 released by the National Bureau of Statistics (NBS) also on Tuesday, showing a drop to 15.37% year-on-year, from 15.90% in November.

Another seeming driver of the latest stock market rally in Nigeria is the low yield on “risk-free” fixed income like Treasury Bills and bonds, which has made otherwise “riskier” but more rewarding asset classes like equities more attractive. This is especially true in the case of shorter maturity as the earnings reporting season beckons for dividend declaration, which would boost yields despite the recent galloping prices. This attractiveness will continue until fixed income yields across the curve tick higher as weekly stock appreciation is above 15%. The New Year’s assets reclassification by fund managers, PFA’s and market operators will support an up market ways through April, with intermittent pullbacks and spikes along the line, due to profit taking and bouts of disappointing numbers, which cannot be ruled out during the earnings season.

Meanwhile, Tuesday’s trading ended with the All Share index gaining 935.72 points to close at 44,054.72 after opening at 43,119.00, representing a growth of 2.17% on high traded volume that was smaller than previous levels. Similarly, market capitalisation for the day rose by N335.22bn, close at N15.78tr, from an opening value of N15.45tr which also represented 2.17% value appreciation. 

Value gain across low, medium and high cap stocks impacted positively on the NSE’s YTD returns, pushing it to 15.20%, just as market capitalisation gained N2.17tr, representing 15.97% YTD growth from its opening value.
The benchmark index and all sectorial indices closed in green, except for the NSE Industrial that was 0.41% in red at end of the day. Market breadth was positive and strong with the advancers outnumbering decliners in the ratio of 46:16 to continue the second up market of the week.
Market activities in volume and value terms for the day were mixed as volume was down by 13.3% to 635.4m shares from previous day’s 730.62m shares, while value was up by 21.19% to N7.64bn from Monday’s N6.3bn. Transaction volume for the day was significantly boosted by financial services and conglomerate sectors, as trading was heavy in Access Bank, Transcorp, FBNH, UBA and Fidelity Bank that topped the activity chart as most traded by volume.

FBNH and Sterling Bank topped the advancers’ table for the day with gain of 10.21% and 10.00% respectively to close at N12.85 and N2.20 each. The gains were propelled by positive market forces, while Honeywell and Law Union led the decliners’ table after shedding 5.98% and 4.55% at N3.30 and N0.84 respectively, as a result of profit booking by traders and investors.

TODAY OUTLOOK
We expect volatility, profit taking and repositioning for earnings reporting season as quarterly and full year score-cards of companies are expected to continue, as more positive economic data roll in. The energy behind money flow index has increased, soaring at the end of Tuesday’s trading session to signal that funds are entering the market.
However, we would like to reiterate that investors should go for value equities, especially during this season that dividend payment is approaching.

We advise investors to allow numbers 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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