Profit Taking, Repositioning In Value Stocks May Continue As Investors Digest Budget 2017 Act


Post Views: 493 Market Update for June 12 Nigeria’s equity market started off the week with a plunge and follow through in the last three day cautious...

FAAC Meeting Deadlock: Adeosun Seeks Intervention Of Buhari, Osinbajo
FBNQuest Projects 11.3% Inflation In May, Expects Rates Retention At MPC
Investors To Begin Portfolio Realignments As Buhari Declares For 2nd Term Ambition

Market Update for June 12

Nigeria’s equity market started off the week with a plunge and follow through in the last three day cautious trading that resulted in profit booking after rally spanning three consecutive weeks. The benchmark index dropped below the 33,000 level and rallied back to 33,445.99 before closing lower, a reflection of mixed sentiment playing out. It pulled back to retest twice between morning and afternoon as a result of a late rally that reduced the pullback to marginal.
The investing community’s worry as regards the delayed assent to the 2017 budget following the joggling of figures by the National Assembly has finally abated with its being signed into law by Acting President Yemi Osinbajo, on the order of President Muhammadu Buhari in a June 9 letter to the Minister of Budget and Planning, Senator Udoma Udo-Udoma. The signing into law is expected to kick-start implementation of projects and progammes that will bring the long expected second leg as contained in the Economic Recovery and Growth Plan (ERGP) that would go a long way to support the monetary policies of the Central Bank of Nigeria (CBN).
It would be recalled that the apex bank has in recent months carried out strategic reform by way of interventions aimed at making foreign exchange readily available to all segments of the market to further drive economic recovery and thereafter usher it into the growth phase as contained in the ERGP unveiled in February.
Also, the rebound of oil price on Monday has in a way shown the resilience of oil cartel- the Organisation of Petroleum Exporting Countries (OPEC) to manage supply, thereby helping to sustain the price above $50 per barrel. Oil, at the international market, is projected to hit $60pb before year end.
Meanwhile, the Composite index NSEASI for Monday shed a slim 41.40 basis points to close at 33,235.28, after opening at 33,276.98 points, representing a 0.12% decline on a high volume traded. It was however lower when compared to previous day’s transaction level. Volume index for the day was 1.05 with a buying position of 57%, while selling volume was 43% of the total transactions for the day. Market capitalisation for the day was down by N14.31bn to close at N11.49tr, from an opening value of N11.5tr, representing 0.12% depreciation in investors’ portfolios.
The downturn in the share prices of International Brewery, 7-Up Bottling Company, Nestle, Total, FBN Holding, Oando, UBA, Flour Mils, Seplat, FO, Zenith Bank impacted the All-Share index negatively, reducing the year-to-date return to 23.67%, while growth in market capitalisation for the same period stood at N2.25tr, representing a 24.25% rise above the year’s opening value.
Market breadth for day was negative as the number of decliners outpaced advancers in the ratio of 30:20 on high volume of trade to halt the three-day up market.
Market activities in terms of volume and value were mixed as volume went down by 26.99% to 501.08m shares from previous day’s 686.3m shares while value was up by 0.66% to N6.11bn from the previous day’s N6.07bn. Transactions in the shares of ACCESS BANK, FCMB, GUARANTY TRUST BANK, FBNH and TANSCORP topped the volume chart to close the day’s trade.
At the end of the trading, Ashaka Cement topped the advancers’ log with its share price gaining 10.09% to close at N12.77 per share, on the back of the ongoing consolidation of its business with that of sister company- Lafarge Africa Plc. It was followed by May & Baker with a 9.86% gain to close at N3.12 per share, impact of the Memorandum of Understanding (MoU) with the government to produce vaccine.
On the flipside, International Brewery led the decliners’ log, after dropping 8.63% to close at N29.45 on the back of weak earnings following which the directors did not propose a dividend for approval at the next annual general meeting and profit taking, while UACN followed with 5.84% to close at N17.40 each on profit taking.
As the market opens this morning, expect mixed action of profit taking and repositioning in value stocks to continue with Monday’s signing into law of the 2017 budget, ahead of the release of May inflation figures. All things considered, investors should not panic on the recurrent pullbacks if they take position based on strong numbers and future prospects of any stock.
Again, we advise that investors allow numbers to guide their decisions to reposition for the rest of the year’s trading activities, especially now that prices of stocks are looking up ahead of recovery economic fundamentals, if the numbers will support the price reversal or continuation.
It is time to use your technical tools to take decision by knowing the support and resistant level to reposition or exit any position.
Once more, at the risk of repeating oneself, we must reiterate that industry potential is very important when picking a stock, because there are factors that are sector-specific and would naturally impact positively or negatively on companies operating within such an industry, especially now that the economy is recovering. Invest wisely and sign up for investdata buy & sell signal setup and the upcoming Traders & Investors workshop call 08032055467 and 08111811223