Market Update for Week Ended August 11 and Outlook for August 14-18

The post earnings reporting season stock buying position of the market in August revealed rekindled investor confidence and improving market fundamentals in form of strong liquidity level, in addition to impressive corporate scorecards that beat market expectations to sustain the trend that started with Q1 numbers.
The market last week was mixed to close higher, defying global panic amidst the geopolitical tension of North Korea in continuation of its five consecutive weeks of up market with increasing demand for stocks on the strength of more surprising earnings that had recorded up trending positions from the 2016 full year numbers, first quarter 2017 and the just concluded earnings season.
Despite, profit taking activities witnessed during the period, market sentiments remained positive, as investors await the results from first tier banking stocks result and the announcement of interim dividend. Zenith Bank became the first in its class to release its numbers as expected, which surpassed market estimates with impressive performance, based on which the directors offered a 25 kobo dividend in line with its equalisation dividend policy that began three years ago.
Volume index on the Nigerian Stock Exchange (NSE) was 1.01 with buying position at 97% and 3% selling volume of the total transactions as positive sentiment for consumer goods spiked up, helped by foreign investors interest in accumulating Nigerian Breweries, Guinness, Unilever and Nestle. This is on the strength of their Q2 numbers and future expectation of better performance on the back of improvements in the nation’s economy as recovery from recession continues to support fundamentals. Noteworthy also is the expectation that Nigeria’s 2017 budget implementation and payment of local contractors with promissory note would kick off soon to further boost economic activities.
The expected second quarter GDP and inflation figures for July which are likely to continue declining just as those of the preceding five months, at a time when Nigeria’s GDP is at the verge of crossing into positive territories to further strengthen the positive macroeconomic indices released so far.
Meanwhile, the composite NSE All-Share Index for the period gained 773.45 points to close at 38,198.60 points, from 37,425.15 points, after crossing the psychological line of 38,000 to a three year high of 38,227 within the week, representing 2.07% growth on a high transaction volume. Similarly, market capitalisation for the period closed higher at N13.17tr from an opening value of N12.9tr, representing a 2.07% value gained in investors’ trading position.
The top performing stocks that dominated the advancers table for the week were a mix of low, medium and high cap stocks, as market players aligned their portfolios along the strong numbers posted by in the just concluded quarterly earnings reporting season.
Despite the mixed performance during the week, market breadth remained positive as the upturn in share prices pushed the NSEASI’s year-to-date return to 42.14%, just as market capitalisation appreciated by N4.01tr, representing a 42.64% gain from the year’s opening value.
Market breadth for the period was positive with number of advancers outweighing decliners in the ratio of 30:28 on a high volume of trades to remain in a bullish run over the five-week period, despite the pullback during the week as a result of profit booking.
Stock markets around the world closed lower due to the political risk amidst the growing geopolitical tension as North Korea continues to test its missile near the U.S boundary thereby sending equity price lower, while oil prices rose slightly in volatile trading as the market weighed lower on U.S crude.
Britain’s FTSE 100, Germany‘s DAX, Japan’s Nikkei and U.S market indexes were sharply lower as investor concerns over the looming nuclear war if things are not properly managed at this point. U.S market indexes were down in addition to weak inflation figures as the consumer price index released last Friday rose just by 0.1% in July, falling short of analysts and economists forecast of a 0.2% increase. The weaker than expected figure could make it difficult for Feds to continue its fiscal tightening efforts.
In Europe, a Reuter poll found that the ECB is slightly more likely to announce a change to its asset purchase programme in September following strong economic performance of the region. In Asia, Chinese officials expressed concerns over the country’s growing property bubble.
Back home, the All-Share Index opened the week on a positive note, gaining 0.27% as investors kick started portfolio reshuffling and rebalancing activities that was maintained on the second trading day, with another gain of higher magnitude of 1.26%. The uptrend was sustained in the next day trading session with another gain of 0.38%, before being reversed on Thursday amidst profit booking following which it lost 0.11% and were reversed on Friday to gain 0.25% to bring the period close at 2.07% gain.
The composite index and other sectoral indexes for the period closed the week in green, except for NSE Banking, NSE Insurance, as well as the NSE Oil/Gas were in red, while the NSE ASeM closed flat.
The week’s transaction, measured by aggregate volume and value, were down by 41.09% and 74.68% respectively to 1.52bn shares, from the previous week’s 2.58bn units, worth N28.9bn, as against previous week’s N114.12bn.
At the end of last week’s trading, Guinness topped the advancers log, chalking 27.08% to close at N91.50, driven by sectoral positive sentiment; followed by Nahco’s 20.27% gain to close at N3.56 on impressive Q2 numbers. The decliners’ log on the other hand was led by NEM Insurance, which lost 18.52% to close at N1.10 on market forces, ahead of the 12.54% slide by Dangote Sugar, which closed at N13.04 per share, following adjustment of its price for the 50 kobo dividend proposed by its board at the end of half year in the current financial year.

Market Outlook
Expect a mixed market this week due to profit taking and portfolio reshuffling on the strength of the Q2 numbers released recently as analyst, investors and traders study the numbers to take decisions, ahead of the release of inflation data for July and second quarter GDP figure.
Bearing all these in mind, investors should position in stages in valued stocks with high upside potentials, despite their current prices on the exchange as many are still undervalued.
Again, the time to combine company fundamental data and chart pattern for your trading and investing decisions is now, to enable you know the support and the resistance levels.
Train yourself and study to know the new approach to adopt at this point and going forward,
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