MARKET UPDATE FOR JANUARY 4, 2018

EARLY POSITIONING AHEAD OF EARNINGS SEASON, POSITIVE ECONOMIC DATA BUOY INDICATORS

Nigerian Stock Exchange (NSE) basic indicators got a significant boost, the first for the year, on Thursday, helped by the nation’s upbeat economic data, which lifted equity on the bourse as investors and traders continued to reposition in value stocks, while companies with expected quarterly earnings are trending up, thereby supporting the ongoing rally. This resulted to breakout of many resistance levels of stocks in the New Year.  

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The continued volatility, change in market holding structure, increasing volume of trades and increasingly positive market breadth revealed rising demand for stocks by investors.   

Thursday’s trading session was nonetheless a very volatile, closing higher to reverse the previous down market on the strength of heavy accumulation of positions in all classes of stocks, whether low, medium or high caps, ahead of the upcoming major earnings reporting season.

The day’s trading started out on a gap up that was sustained during the mid-morning but pullback in the midday as profit takers sold down in high value stocks to reduce the day gaining momentum, but retraced up again by the afternoon, hitting intraday highs of 38,848.31 basis points from a low of 38,182.94 before closing at 38,676.12 for the day.   

The Purchasing Managers Index (PMI) at 59.3 points in December as released by the Central Bank of Nigeria (CBN) showed great level of activity for the period, revealing a consistent expansionary manufacturing sector over a 10-month period. It was helped by an equally robust foreign exchange market that continued to influence the sector and economy positively, beginning from April when the apex bank introduced Investors and Exporters FX (IEFX) window that supported the ongoing growth momentum and positive macro-economic indices significantly propelled Nigeria’s exit from recession in 2017Q2 when GDP grew by 0.72% (revised).  

In other news, the Minister of State for Petroleum Resources told a public hearing on the fuel scarcity by the Senate Committee on Petroleum Resources (Downstream) on Wednesday that the Nigerian National Petroleum Corporation (NNPC) has so far incurred a cumulative loss of N85.5bn on importing petrol in three months, representing a pseudo subsidy, selling at the current N145 per litre. It was also learnt that petrol could go for as much as N175, being the market determined price, since its landing cost is now N171/litre, which resulted in the stoppage of importation by independent marketers. Already, arising from the current crude oil price of $67 per barrel, Saudi Arabia, the biggest member of the Organisation of Petroleum Exporting Countries (OPEC), as well as the United Arab Emirates (UAE) have increased the pump price of petro in their domains, just as Ghana.

Meanwhile, market technicals for the day was strong and positive as funds flows into the market as revealed by institutional money flow index at the close of Thursday’s trading session, just as buying pressure stood at 74%, compared to previous day’s 100% selling position, which signaled positive sentiments for stocks despite the  profit taking activities. Volume index stood at 1.52 points, while selling pressure was 24% of the day total transaction.

At the close of trading, Composite NSE All-Share index gained 488.84 points to close at 38,676.12, after opening at 38,187.28, representing a growth of 1.28% on huge traded volume that was higher than previous day’s level. Similarly, market capitalisation for the day was up N173.96bn to close at N13.76tr, having opened at N13.59tr.

The upturn, due to value gain in low, medium and high cap stocks impacted the NSE’s Year-to-Date returns, turning it 1.13% green, from its previous day negative territory, just as market capitalisation for the same period was up by N154.06bn, representing 1.13% growth from its opening value.

The ASI and other sectorial indices closed higher, except for the NSE Consumer Goods and NSE Lotus Islamic that closed red, while the NSE AseM remained flat.

Market breadth for day remained positive and stronger as the number of advancers widened, outnumbering decliners in the ratio of 46:6 to continue its third-day of positive breadth, halting previous day bear market on a strong buying pressure.

Market activity in volume and value for the day were up by 39.95% and 83.23% respectively as investors and traders exchanged 825.13m shares worth N3.88bn, from the previous day’s 589.58m units valued at N2.12bn, boosted by transactions in financial services and conglomerate stocks. Especially, trading was heaviest in shares of Diamond Bank, FCMB, Skye Bank, Sterling Bank and Transnational Corporation of Nigeria (Transcorp), which topped the activity chart as most traded stocks by volume.

Best performing stocks as seen on the day’s top advancers’ table were: Dangote Flour, which notched 10.12% to close at N14.04 each; followed by May & Baker’s 10% gain to close at N2.75 per share; while NEM Insurance led the decliners table after shedding 4.85% to close at N1.57; ahead of Custodian and Allied Plc’s 4.77% at N3.79. The top gainers were propelled by positive earnings and market expectations of their full-year earnings reports and possibility of higher dividend payout, while the laggards were plagued by the profit taking activities of traders.

TODAY OUTLOOK

The ongoing volatility will continue in today’s session but profit booking amidst the ongoing rally is imminent as stocks breakout of their resistance levels, while repositioning for earnings reporting season will also continue as quarterly score-cards of companies already reveal stronger numbers that support dividend payment.

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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Tel: 08028164085, 08032055467