Market Update for July 26
Nigeria’s equity market at the end of midweek’s trading had a volatile day, with strong volatility at the opening and end.
The day started out with a pullback to intraday low of 35,504.88 and made a three year new high of 37,794.22 to close higher in continuation of its 15-day bullish run with highly capitalized stocks recording value gain on the strength of increasing demand for blue-chips in expectation of their Q2 numbers. Many investors and traders also used the blue-chips to build hedges in their portfolios.
The day’s volume traded index was 0.94; buying position, 96% and selling volume, 4% of the total transaction. Sectoral indexes were higher as investors and traders took position in different sectors with expectation of their Q2 scorecards.
The increasing inflow of foreign portfolio investors into the market continues to be driven by the flexible exchange policy of the Central Bank of Nigeria (CBN) which has helped to stabilize the rate of the Naira. In particular, the import and export window of the FX market continues to get more liquidity from oil companies, export businesses and banks, while the CBN plays the supervisory role. This is gradually impacting positive on the corporate performance and macro-economic indices.
With the economy or markets of the developed world are headed for crash in no distance time, which will affect U.S., Europe and Japan, many foreign institutional investors are looking at emerging markets, particularly Africa as preferred destination to diversify their portfolios. Many of these investors have over the years identified the infrastructural challenges on the continent and the huge investment opportunities they present, especially with Nigeria the largest economy in Africa in recession and South Africa, the second largest economy going into recession. This makes Nigeria’s stock market a preferred destination for Foreign Portfolio Investments (FPI), at a time transparency in the Nigerian market remains high.
Meanwhile, the benchmark All-Share Index gained 1207.77 basis points to break into its three-year psychological line of 36,000 on above average market traded volume to close at 36.740.77 from an opening figure of 35,533.00 points, representing a 3.40% growth. Also, volume transacted for the day was lower than previous day’s, even as market capitalisation went up by N416.36bn to close at N12.66tr from the opening value of N12.25tr representing a 3.4% growth to enhance investors’ positions.
Price appreciation in low, medium and high cap stocks boosted the All-Share index year-to-date returns to 36.71%. Also, market capitalisation over the same period improved by N3.25tr, representing a 36.94% growth over the year’s opening value.
Market breadth for Wednesday’s session was positive as the number of advancers outnumbered the decliners in the ratio of 31:17 on average volume of trade to continue the 15 day up market. Market activities in terms of volume and value were down by 34.89% and 21.10% respectively at 335.34m shares worth N4.64bn, from the previous day’s 513.45m units valued at N5.9bn.
Transactions in the shares of FBNH, UBA, Access Bank, Zenith Bank and Fidelity Bank topped the volume chart to close the day’s session.
At the end of trading activities, Conoil topped the advancers’ log, gaining 10.21% to close at N33.04 each on the back of its expected Q2 numbers. It was followed by Fidson Healthcare with a 10.06% gain to close at N3.39 per share, on market forces and expected impact of government policy on the health sector to influence its numbers going forward.
On the flipside, Aiico Insurance led the decliners’ log after dropping 5.26% to close at N0.54 on profit taking activities, following its unimpressive Q2 numbers, ahead of SCOA’s 4.77% decline to close at N3.09 per unit on market forces as this company has been inactive on the exchange.
TODAY’S OUTLOOK
As trading opens this morning, the market is expected to continue riding on the prospect of more Q2 numbers being released amidst countdown to the end of this earnings season. Already, investors and traders have reacted to the mixed numbers released so far, receiving positively to surprises, while treating disappointing earnings otherwise.
However, it is advisable to expect a blend of surprises and disappointment from the companies reporting their numbers, even as investors need not panic if any pullback occurs now due to profit booking, if they have taken position based on strong numbers and future prospects of any stock. You should therefore fix your gaze on the actual numbers and bail out when expectations are not met, thereby cutting their loss.
Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year’s trading activities, especially now that prices of stocks are looking up ahead of the improving 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.
Be reminded once more 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. For stocks that should be on your shopping list to buy in this oscillating market or pullbacks sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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MR. OMORDION AMBROSE
CHIEF RESEARCH OFFICER
INVESTDATA CONSULTING LIMITED
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
