Market update and Outlook for March 27-31
Nigeria’s equity market surprisingly succumbed to selling pressure from profit takers to close the week lower, despite the increasing number of seemingly impressive earnings reports released during the period with mixed payout as revealed by corporate actions from the companies.
During the week, the Central Bank of Nigeria (CBN) intensified its intervention in the forex market to bring the desirable convergence in rate to strengthen the naira and boost business activities, meeting the demand in the interbank and FMDQ platforms, putting many currency traders on the losing streak.
Also, in a bid to improve liquidity in the system and support the CBN’s efforts, the Federal Government plans to start refunding the Paris Club deductions to state governments thereby enhancing liquidity in the system as the money would be used to pay arrears of salaries and pension. In the first tranche, a total of N388.3 billion was distributed, while the second tranche expected to be in the region of N500bn is underway for injection into the economy when eventually released as directed by President Muhammadu Buhari during a visit to a meeting of the National Economic Council (NEC). This is expected to boost confidence and further support the current economic gains and sustain the ongoing recovery mode.
Meanwhile, the composite NSE All-Share Index shed 198.23 points to close the week at 25,454.93 points, from an opening figure of 25,653.16 points, representing a 0.77% decline for the period on a higher volume of trade compared to the previous week, as traders took profit to reposition for this last week in the month of March and deadline for submission of 2016 financials for companies with December year-end. This is also end of quarter window dressing week for market players. Similarly, market capitalisation for the period closed lower at N8.81 trillion, from an opening value of N8.88 trillion, representing a 0.80% loss of investors’ capital.
The advancers table for the week was dominated by high and low cap stocks as traders sold their positions in medium stocks for profit, while the market responded to dividends declared and the low price attraction.
Decline in stock prices during the week further increased the NSEASI’s year-to-date negative position to 5.28%, while during the same period market capitalisation was pushed to a loss of N368.85 billion, representing 4.69% decline from the opening value for the year.
Market breadth turned negative and weak as the number of decliners outpaced advancers in the ratio of 35:16 on a high volume of trade on sell-off, due to profit booking as investors repositioned for the second quarter of the year in expectation of more quarterly numbers in April. This was especially in the stocks that had up trending earnings in 2016 as a guide since nothing much has change in the economy.
The international markets for the week were mixed to close lower as amidst the weakening rate of the US$, correction in US equity market as a result of profit taking, rate hike and healthcare reforms that continues to food drag. This is in additional to the recent attack in UK and investor concerns over the rising corporate debt in China.
The US markets over the week were mixed and highly volatile as revealed by CBOE volality index which moved from 11.0 to 14 points, before closing the week at 13 point, added to the mixed signals in the housing market. Prices of old homes were falling and new home sales on the rise, higher than February estimation.
Japan’s Nikkei, Germany‘s DAX and Britain’s FTSE 100 were lower over the week to reflect the uncertainty surrounding the global economy and the financial markets as monetary and fiscal policies continue moving in different direction.
In Europe, the PMI (Purchasing Managers Index) remains positive and strong at 56.00 point, the highest in the past six year, as investors in the region were unnerved by last week’s terrorist attack in the United Kingdom amidst persisting anxiety over the healthcare reforms in the U.S. In Asia, despite the rising home sales in china, investors remain concerned about the country’s soaring corporate debt level that could create a problem over the coming years, even as it triggered a warning from the Organization for Economic Cooperation and Development (OEDC).
Back home, the index opened the week on a marginal gain of 0.07% which was reversed the following trading session when it lost 0.44% that was sustained in the remain trading sessions of the week to bringing the week’s cumulative loss to 0.77% on a strong selloff of equities.
The composite index and all the sectoral indices for the period closed in the red, except for the NSE Industrial Goods and NSE Lotus that closed green, while NSE Asem was flat.
The market activities for the week, measured by aggregate volume and value were up by 27.18% and 29.32% respectively to 1.31 billion shares from 1.03 billion shares, at N10.32bn from N7.98 billion. This was in contrast to the closing levels of previous week. In the week under review also, a total of 1.31 billion shares valued at N10.32billion were traded in 13,042 deals, compared with 1.03 billion shares worth N7.98 billion, exchanged in 13.441 deals in the previous week.
During the week, the share prices of Greif Nigeria Plc was adjusted for dividend. Unic Insurance was suspended indefinitely on the exchange, whereas Lafarge Africa, Cadbury Nigeria, Stanbic IBTC, MRS Oil Nigeria, Unilever Nigeria and UBA released their 2016 full year earnings reports to the market with dividend recommendation (See the Price and Earnings Tracking for dividend declared), while PZ made available it third quarter report to the market. There also notifications for meetings of board of director.
Lafarge Africa and Fidson Healthcare led the advancers’ log with 13.92% and 13.48% respectively to close at N41.01 and N1.01, while the flip side was topped by Guinness Nigeria Plc and Seplat, which suffered 9.77% and 9.73% decline to close at N60 and N359.28 respectively.
The market this week is likely to oscillate due to reactions to expected earnings release as more 2016 financials may hit the market with some surprises and disappointment in this deadline week and end of the quarter window dressing by market players.
Again, the time to combine technical and fundamental analysis for your trading decisions is now, to enable you know the support and the resistance levels.
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STOCKS TO WATCH
UBA, Eterna, Fidelity Bank, Fcmb, Presco, Aiico and Zenith Bank.
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