Market Update for August 1

The first trading session of August closed positive to reverse the two-day bearish transition on the exchange following market reactions to the release of more positive economic data. One such data was the manufacturing sector’s Purchasing Managers’ Index (PMI) for the month of July, which rose to 56.3, from 55.9 in June to indicate improving production capacity in the country, besides the latest consumer confidence index at 64.8 to reflect improvement in consumer purchasing power, among others that further confirm that the Nigerian economy is fast recovering from recession.
These also supported the bright picture of the economic being painted as testified to by the already released corporate earnings of listed companies that beat market expectations. In the process these improvements have signaled real improvements in economic fundamentals that will support the market’s tenacity to drive stock prices, especially given that many of them are still undervalued, while few others entering the overpriced region, riding on the recent bull-run.
Meanwhile, trading activities on the NSE on Tuesday was extremely volatile as the index was down in the early hours of the session, touching a low of 35,444.00, before rebounding to a high of 36,728.33 and thereafter closing higher on a huge volume that was driven by historic transactions in the shares of Dangote Cement Plc, a stock that accounts for 36% of the NSE’s total market capitalistion.
The day’s volume traded index was 1.24; with buying position of 99% and selling volume, 1% of total transaction.
The improving economic fundamentals and continued CBN intervention continues to sustain the import and export window of the FX market that has helped to closed the gap between the black market and interbank rates which has brought relative stability to the nation’s exchange rate to attract foreign inflow into the economy and market. Foreign investors acquired 440m shares, representing a 2.3% stake in Dangote Cement on Tuesday, after a pension fund manager in Dubai had in 2014 taken 1.4%. This is an indication that the company’s capacity building efforts and investment in many Africa countries is an attraction, especially with earnings power of the company strongly looking up to drive future price.
Meanwhile, at the close of trading, the composite NSE All-Share Index gained 876.82 basis points to breakout the psychological line of 36,000 again, before closing at 36,720.62 from an opening figure of 35,847.75 points, which represented 2.45% growth. Also, volume transacted for the day was higher than previous day’s, even as market capitalisation rose by N306.73bn to close at N12.66bn from the opening value of N12.35bn, representing a 2.45% growth to enhance investors’ positions.
The upturn in the share prices of Dangote Cement, Nestle, Presco, UBA, Zenith Bank, Nigerian Breweries, Stanbic IBTC, and FBNH that boosted the All-Share index year-to-date returns to 36.64%. Also, market capitalisation over the same period improved by N3.41tr, representing a 36.86% growth on the year’s opening value.
Market breadth for day was positive as the number of advancers outweighed decliners in the ratio of 34:20 on a huge volume of trades to halt the two-day down market. Trading activities in terms of volume and value were up by 73.33% and 1686.03% respectively at 874.6m shares worth N94.05bn, from the previous day’s 490.16m units valued at N5.27bn.
Transactions in the shares of Dangote Cement, FBNH, ACCESS BANK, UBA and FCMB topped the volume chart to close the day’s session.
At the end of trading activities, Linkage Assurance topped the advancers’ log, gaining 9.84% to close at N0.67 each on market forces. It was followed by National Salt with a 7.97% gain to close at N11.25 per share, on impressive Q2 numbers.
On the flipside, Morison Industries led the decliners’ log after dropping 9.23% to close at N1.18 on market forces ahead of Forte Oil’s 7.62% decline at N57 per unit on market forces and profit taking.

TODAY’S OUTLOOK
As trading opens this morning, the market is expected to continue it mixed reaction to the Q2 numbers released recently, as surprising numbers are receiving positive reactions, while treating disappointing earnings otherwise.
However, 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