Market Update Feb 7
It is obvious from the statement and body language of some managers of the nation’s economy who just would not realize that there is a nexus between a country’s economy and politics and dare to advise Nigerians to endure the current suffering till 2019 so as to judge the performance of the current Muhammadu Buhari administration.
For a four- year tenure, a government that knows the importance of policy and the need to revamp an economy will not waste two years blaming its predecessor and asking Nigerians to be patience, even while acknowledging that the economy is bad in bad shape. The signs are everywhere are visible even to the blind that Nigerians are suffering, so the question then is: Will all these change the situation without the needful being done?
Let us not be quick to forget how some policies of the government of today brought us to where we are, that is why we are saying that some of the policies need review and introduction of new ones that are fair, transparent and all-inclusive. These are expected to give a clear direction that will attract foreign and private participation that will help to quicken economic recovery.
Worsening the economic conditions of Nigeria in the name of different tariffs to boost internally generated revenue, which has contributed to high cost of doing business and living which have led us to where we are as a nation today. The solution to our economic problem is not approving new tax structure now, or setting up federal task forces on price control, driving all Nigerians to the farm, at a time when the manufacturing sector that will process and preserve the agricultural products to enhance the value chain is dying.
On this note, Nigerians are looking forward to economic recovery and reform policies and plans that will give direction and reverse this dwindling confidence in the system which is now affecting everything in the economy negatively, including the financial markets.
Meanwhile, trading activities on the floor of the Nigerian Stock Exchange closed lower on Tuesday, continuing the bleeding that opened the first full trading week of February as quarterly earnings reports released last week has further dampened investor confidence with 85% of the numbers were below market expectations, reflecting more negative impact of the economic situation on the scorecards. And the earnings reports were mainly from the manufacturing sector, posting red accounts to reflect the impact of government policies on that sector.
Also, the recently released manufacturing Purchasing Managers’ Index for January was down to 48.2 points from 52 points recorded in December 2016, which is not unexpected with the increasing negative macro-economic indices seriously affecting investor confidence and their investment being seriously eroded on a daily basis, due to the harsh business environment propelled by government policies.
The composite NSE All-Share Index for three straight days has been on a bear transition as many traders and investors reposition their portfolio amidst negative earnings reports. But with the relatively low volume of trade as the 2016 full year earnings season coming closer to its peak, discerning investors and smart money are gradually accumulating in some positions. As sentiment remain mixed with buying volume of 31% and selling position of 69% at the end of Tuesday’s trading session.
At the end of the day, NSEASI shed 140.43 points to close at 25,446.66 points from an opening figure of 25,587.09 points, representing a decline of 0.55% on average volume of trades to continue the three trading sessions of bear run.
Value depletion in medium and large cap stocks like Forte Oil (which recently released its audited result without recommending dividend payment), just as Nestle, PZ Cussons, Zenith Bank, Nigerian Breweries, Guinness, International Brewery and Access Bank have further contributed to deepening the NSE All-Share index year-to-date negative position to 5.34%. Market capitalisation for the same period adjusted its loss position to N477.12 billion.
Market breadth for Tuesday remained negative as the number of decliners outpaced advancers in the ratio of 22:14 on a down market.
Traded volume and value were up by 36% and 75% respectively to 207.18 million shares, worth N1.58 billion from the previous trading session’s 152.36 million shares valued at N903.48 million.
Transactions in financial services stocks like: Diamond Bank, Fidelity Bank, UBA, Staco and Zenith Bank dominated the activity chart as most traded equities by volume.
The NSE All-Share Index and all sectoral indices closed lower, except for the NSE Oil/Gas and NSE Premium that were up while NSE AseM closed flat.
The investing public was notified of Portland Paints and Products Nigeria Plc’s Rights Issue to raise N1.02 billion by way of 600,000,000 Ordinary Shares of 50 Kobo each at N1.70 per share, which opened for subscription. Acceptance list opens: Monday, 23 January 2017 Acceptance list closes: Wednesday, 01 March 2017
At the end of the day, Beta Glass topped the advancers table with 5% to close at N31.50, followed by Caverton, 5% to finish at N0.84. On the decliners table Forte Oil topped by 6.42% to close at N56.82, next was Nestle by 5% to close at N646.
DAILY TIME FRAME NSEASI
The index on daily time frame has formed symmetric triangle chart pattern and has broken down the triangle moving to strong support level of 25,203.63 as mentioned in our January review. The momentum and trending ability of the market on a daily time frame is strong as ADX is below 20. The odds of the market remaining in this direction for the rest of the week are high, as momentum is high as the recent breakout confirms a weaker market. The index is trading below its shortest moving average. Also at its oversold region with MFI looking up to indicate that funds are still entering the market. Traders should watch out.
Analyst Opinion: The ongoing trend is likely to continue until positive 2016 full year numbers start to hit the market. But discerning and income investors should go for the stocks strong fundamental and are likely to pay dividend. The pullback is to buyers advantages.
