Market Update for Week Ended June 14 and Outlook for June 19-22
At the end of the second trading week in June, Nigeria’s equity market maintained its recovery moves to close positive, despite the mixed performance recorded within the period as short term traders booked profit, leading to sell-offs in some stocks ahead of the public holidays declared for Friday and Monday by the Federal Government to mark the end of Islamic month of Ramadan.
Thursday’s trading pattern to end the week supports continuation of an uptrend as revealed by candlestick, after the market had opened on a sharp decline and retraced up later on improved buying interest that slowed down the losing momentum. This was while market players digested the recent May inflation data released within the period which was the 16th consecutive month of moderation from its 18.7% peak in January 2017.
The persistent drop in the inflation rate to the current 27th month low at 11.61% and way below the nation’s 14% benchmark Monetary Policy Rate (MPR) theoretically supports interest rate cut to further boost economic activities and encourage investment in cottage industries, while offering relatively cheaper funds for expansion.
With the expected harvest season and continued impact of the Central Bank of Nigeria’s intervention in the forex market, Investdata estimates June consumer price index of 10.92%, which will further put the MPC committee under pressure to cut rate or manage capital outflow risk as smart or hot money are looking for high interest or yield environment to invest. The challenge before next month’s MPC meeting is to choosing between pleasing foreign portfolio investors or boosting economic expansion and growth.
The mixed sentiment in the review period were evident in the buying pressure of 51% and selling volume of 49% that signal the adoption of wait-and-see attitude by players while discerning investors accumulate ahead of March full-year and second quarter dividend payouts. The two-day profit-taking that led to sell-off last week reflected on the money flow index which slipped to 38.09 points from Thursday’s 41.20 points as the Nigerian Stock Exchange’s benchmark All-Share Index traded above its 50-Day Moving Average (DMA) for just a week now, while remaining below its shortest moving average of 20-DMA.
Equity Indicators Last Week
For the week, however, the NSE ASI gained 258.79 basis points, closing at 38,928.02 basis points after opening from 38,669.23bps, representing a 0.67% growth on a low volume of transactions, compared to the previous week’s. The volume index of total transactions for the week was 0.70, as the index hit intra-week high of 39,425.61 from low of 38,407.08bps to continue its two weeks recovery trend and remain above 38,000 mark. Similarly, market capitalisation for the period rose by N150.9bn to close at N14.1tr from an opening value of N14.01tr, representing a 0.67% value appreciation as dividend income investors positioned ahead of the earnings reporting season.
Low price stocks dominated the advancers table at the end of the four trading sessions for the week as bargain hunters took advantage of the undervalued nature of the market due to five months of correction. Fund managers and other players that would earn quarterly fee or commission are positioning ahead of the half year earnings season. Knowing that pension funds investment in equity market favours dividend companies with a five-year record of consistent payout. This is especially as the market’s average dividend yields remain above 4% and the new National Pension Commission (Pencom) assets liability risk management categorisation kicks off next month.
The recovery in equity prices for the period impacted positively on the NSEASI’s year-to-date returns, which now stands at 1.79%, just as market captalistion growth stood at N549.38bn, representing 3.48% rise from the year’s opening value.
Positive Market Breadth
Market breadth during the week was positive as advancers outweighed decliners in the ratio of 40:28 on low volume of trades and average buying pressure as traders and investors took advantage of low prices to position in expectation of external stimulus or news to influence the market and impact prices positively.
The week’s trading opened positive on Monday and continued Tuesday with gain of 0.5% and 0.8% respectively, before pulling back on Wednesday and Thursday, when it lost 0.35% and 0.27% respectively, due to profit taking that left the week with just 0.67% gain.
Ii was a mixed sectorial performance for the period as all indexes were in green except for the NSE Industrial and Consumer Goods indices that closed red at 0.12% and 0.85% respectively, while the NSE Oil/Gas, Insurance and Banking were up by 3.84% 2.54% and 0.26% respectively, leaving the AseM flat.
Activity in volume and value for the period were down by 0.57% and 40.80% to 1.74bn shares worth N18.46bn, from previous week’s 1.75bn units valued at N31.18bn.
Japual Oil and Equity Assurance were the best performing stocks for the period, topping the advancers table with 22.58% and 20% gains respectively, closing at N0.38 and N0.24 per share, due to low price and sentiments. The worst performing were Mutual Benefits Assurance and AG Leventis that lost 13.89% and 7.55% to close at N0.31and N0.49 respectively on price mark down, profit taking and market forces
During the period under review also, the share prices of Cadbury Nigeria, Capital Hotel, Newest, ASL Nigeria and Mutual Benefits Assurance were adjusted for dividend proposed by their directors. Next week, the prices of Cement Company of Northern Nigeria (CCNN) and Conoil are billed to be marked down also for dividend payout.
Market Outlook
We expect, mixed performance with less profit booking as earnings reports for March accounts start rolling in, adding more impetus to the market if the numbers beat expectations. However, let the upbeat economic data and company numbers guide your investment decisions.
Meanwhile, Investdata expects the impact of the rising oil price at the international markets to boost fiscal spending and support economic fundamentals.
Meanwhile, dividend income players are taking position ahead of more economic data, even amidst the expected sustained volatility and repositioning.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially as interim 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. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, 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
