Market Update Feb 2

The hope of economic recovery in 2017 has started to blink at the end of just the first month of the year, despite all the factors that were pointer to this reality in the twilight of last year. This is because nobody starts to build without plans that would guide delivery of desired results at the end of the day, hence the need for government, corporate bodies, individuals and others to do the needful.
Government’s plans are expressed in policies formulated as well as strategies to deliver the greatest good to the majority of its people. It is the policy of government that help businesses, citizen and investors to plan and make projections, because every decision or investment is against expectation, meaning that where there are a lack of policies, inconsistent policies and even those that fuel uncertainty, fear and lack of confidence becomes the order of the day.
The declining inflow of both domestic and foreign investment in the country as recently released by the National Bureau of Statistics (NBS), is as the result of policy uncertainty which has kept investors on the sidelines watching for the earlier clear signal on the guaranteed safety of their investment, rather than just the returns expected therefrom.
The NBS had on February 1, 2017, in its Nigerian Capital Importation- Q4 2016 Report, indicated that capital importation, comprising Foreign Direct Investment, Portfolio and other investments reduced drastically in 2016, falling by 46.86% from $9.64 billion in 2015 to $5.12 billion. This, the report note, is “the lowest value since the series started in 2007, which reflects the numerous economic challenges that afflicted Nigeria in 2016.
“The weakening of the naira may have had an impact: a weaker naira means more can be purchased with each dollar, and therefore investment projects requiring naira payments cost less in dollar terms,” the report added.
Marching order by the government and its economic managers grant visa to foreign investors within 48 hours, and the setting up a price stabilisation task force is a good development. However, policies that will attract and give investors direction and can address the high cost of production which manufacturers end up passing to helpless consumers should be in place first before other measure or steps are taken to boost investment and reduce cost of doing business. The recent corporate scorecards from the manufacturing sector has dampened investor confidence and thereby reducing the rising momentum for earnings season. Confidence has also recently been shaken by the recent reports of infraction/fraud by otherwise big and senior stock market operators, a situation that would in no small measure further weaken the confidence of investing public.
Both the Securities & Exchange Commission (SEC) and the self-regulatory organisation, the Nigerian Stock Exchange (NSE), among other stakeholders, should come up with ways to prevent reccurrence, because such incidences are confidence killers in the market. Confidence is an intangible accept that cost a whole lot to build. But once it wears out for whatever reason, it costs much more to restore and repair the damage done.
Meanwhile, the composite index NSEASI, on Thursday reversed the three straight days of bear transition that resulted from the mixed and negative earnings reports which have pushed many investors and traders out of their early position to cut losses and protect their investable capital ahead of earnings season. But with the season coming closer to its peak, discerning investors and smart money are gradually accumulating.
At the end of the day, NSEASI gained 32.69 points to close at 25,936.24points from an opening figure of 25,903.55 points, representing a marginal growth of 0.13% on a high volume of trades to reverse the three previous trading sessions of bear run.
Value appreciation of high cap stocks prices reduced the benchmark index year-to-date negative position to 3.49%, while market capitalization for same period adjusted it loss position.
Market breadth reversed positive as the number of advancers outpaced decliners in the ratio of 20:17 on a bearish mood.
Traded volume and value were up by 44.31% and 13.91% respectively to 355 million shares, worth N1.72 billion from the previous trading session’s 246 million shares valued at N21.51 billion.
Transactions in financial services stocks like: Continental Reinsurance, Staco, Zenith Bank, Diamond Bank and Fidelity Bank dominated the activity chart as most traded equities by volume.
The NSE All-Share Index and all sectoral indices closed green, except for the NSE Oil/Gas and NSE Lotus that went in the opposite direction by 1.56 % and 0.78% respectively, just as the NSE Industrial goods and NSE AseM were flat.
Northern Nigerian Flour Mills and Academy Press released their mixed third quarter earnings reports to continue the trend of poor Q3 corporate score-cards, a situation that continues to weaken confidence in the market. Also at the end of the day, Unity Bank led the top advancers, rising 5% to close at N0.84, followed by Oando, 4.82% to finish at N4.78. On the decliners table Forte Oil topped by 9.74% to close at N61.02, next was UACN Property by 9.38% to close at N2.61.

Outlook for today

The market is likely to close lower to continue the oscillating mood, being the last trading session of the week. However, taking position in fundamentally sound stocks with high possibility of dividend payment should be the rule rather than the exception, while new buyers should take advantage of pullbacks and the up and down movement to position in stages.

By Ambrose Omordion