MARKET UPDATE FOR WEEK ENDED JANUARY 12 AND OUTLOOK FOR JAN 15-19
PROFIT TAKING, VOLATILITY MAY CONTINUE AMIDST PANIC SELLING, REPOSITIONING FOR EARNINGS SEASON,
Equities’ trading for the second week of
2018 on the Nigerian Stock Exchange (NSE) closed higher with prices of industrial
goods stocks galloping more sharply than their peers in banking, consumers and
petroleum marketing sectors. The traded volume within the period was huge as
there has been no such record of 5.02bn shares transactions in the second week
of a new year in more than a decade, attributable to more investors swooping in
on the NSE which ranked second best performing bourse among emerging market.
Add this to the fact that most Nigerian equities remain undervalued, despite
the huge price gains of 2017, helped at a time the economy is in a strong
recovery mode with the upbeat macro-economic indices that support strong market
fundamentals, amidst the improved quarterly earnings reports of most companies,
attracted huge inflow of funds into the stock market particularly from foreign
portfolio investors, domestic institutional players, fund managers and, of
course, smart money.
The extended volatility from 2017 was
extremely high in the week under review despite the seeming slow down on the
last trading day of the week as a result of the much anticipated profit taking
from the recent rally, especially with the market hitting new four-year highs
and many stocks continuing to hit new 52-week highs daily, and in the process
creating wealth for discerning investors and traders who had positioned ahead
of earnings reporting season.
Investors are also positioning, mindful
of the two weeks left for companies with March and September year-end to provide
their third and first quarter earnings reports respectively to the market.
For Q3 numbers, they include stocks like
Honeywell Flour, International Brewery, Seven-up Bottling Company, Flour Mills
Nigeria, Redstar Express, University Press and Norther Nigeria Flour Mills,
while Vitafoam is expected to provide its Q1 numbers within the remaining two
weeks of January.
Bearing these in mind, investors should
keep their gaze on these companies as their numbers start pouring in any moment
from now. This arises from the fact of the significant gains some have seen
throughout 2017 and the fact consumer goods stocks remain among the market’s major
drivers, among other economic factors.
Vitafoam has kicked off the earnings
season with a dividend of 15 kobo, representing a 25% growth from 12kobo in 2016, despite a loss
before and after tax, which should give the investing public an insight into what
is likely to happen when the actual numbers begin to emerge on the exchange.
Meanwhile, the composite NSEASI action
has remained in a rising channel pattern that supports an uptrend, while the
index is still trading above 50 moving average as institutional money flow
index is still looking up as at last Friday.
NSE WEEKLY TIME FRAME
The weekly market technicals were strong
and good, irrespective of the fact that it closed southward on the last trading
day of the week with buying pressure at 84% and selling positions of 16%, while
the week’s volume index was 2.93 of total transaction. The market’s
psychological line of 43,000 point and four-year resistance level of 43,141.17 were
broken, touching new highs of 43,670.57 from the low of 38,908.12 basis points.
Market breadth was positive, reflecting appreciation on equity prices.
The All-Share index gained 3,975.64 points
to close at 42,898.90 points, from an opening figure of 39,923.26 points,
representing a 10.21% growth on a higher volume, which was higher than previous
week’s. These transactions were driven by activities especially in financial services
and conglomerate sectors. Similarly, market capitalisation for the period
closed higher at N14.92tr from the opening value of N13.85tr, representing a 10.21%
value gain in investors’ portfolios, with low value stocks topping the
advancers’ log.
This was attributed to low valuation and
high upside potentials as many stocks are selling below their 2014 prices on the
back of the improving numbers emanating from these quoted companies. During the
week also, first and second tier banking stocks recorded strong growth before
panic selling set in with traders and investors cashing out gains from the
market on Friday.
The week’s bullish sentiment was as a
result of early positioning by all class of market players in the low, medium
and high cap stocks ahead of the earnings season which impacted positively on the
NSE ASI’s year-to-date return to 12.17%. Market capitalisation for the period
grew by N1.54tr, representing a 12.17% gain from the year’s opening value.
Market breadth for the week was also
positive with the advancers’ outweighing decliners in the ratio of 70:6 on a
huge volume of trades to sustain two weeks of bull market.
International markets were mixed over
the past week, as commodity prices continue to rise, amidst interest rate hike
in U.S as government is moving forward to cut taxes, giving that the economy
and the stock market have been looking up since the incumbent President came on
board. Europe and Asia’s economic growth in the global movement in 2018 is also
of major concern as fund managers are moving seriously into emerging and
Fortier markets with high potential of return despite the associated risks.
Back home, the composite index NSEASI opened
the week on a positive note, gaining 2.38% to consolidate the previous trading
session’s up market, which was sustained on the second trading day with a 1.29%
notch. This uptrend continued at the mid-week and Thursday with the index
gaining a robust 3.60% and 2.93% respectively, but the market gave up on Friday,
when the NSE ASI lost 0.33%. This was due to profit booking and panic selling which
slashed the week gains to 10.21%.
The benchmark index and all sectoral
indices closed higher in the period, except for NSE AseM that was flat.
Market transactions for the week, in
terms of volume and value were up by 44.40% and 266.67% respectively to 5.02bn shares
worth N68.97bn from the previous week’s 2.42bn units valued at N18.81bn.
The best performing stocks for the week
were Honeywell Flour and Skye Bank which gained 39.68% and 37.70% respectively
to close at N3.52 and N0.84 per share, due to their low price attractions and
earnings report expectation for Honeywell, while Skye Bank’s was due to bullish
sentiments in the market and it sector.
The worst performing equity for the
period was GSK, which lost 2.71% to close at N21.50 on profit taking; followed
by Dangote Sugar 2.65% slide on profit taking to close at N21.27.
Expect profit taking and volatility to continue in the midst of panic selling and repositioning ahead of earnings reporting season, as more companies notify the exchange of their closed period and board meetings to approve full-year and quarterly earnings reports.
This week, expect the National Bureau of Statistics (NBS) to release Nigeria’s December inflation, as well as transport fare, labour and petroleum products pricing data for same period. Flour Mills right issue kicks off on Monday, just as the NSE management is billed to review of 2017 and outlook for 2018.
However, we would like to reiterate that investors should go for equities with intrinsic value, especially during this season when 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
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
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