The Nigerian equity market for the week grew significantly to consolidate upward rally to the three weeks in a row on a strong demand for stocks that boosted the volume of trades for the period.
On Wednesday, the National Bureau of Statistics (NBS) released the Consumer Price Index (CPI), which measures the nation’s inflation rate reportedly increased by 18.48% (Year-on-Year) for November 2016, representing 0.15% rise over the 18.34% reported for October, but it’s effect on the market was seemingly unnoticed,as santa Claus rally kept the market up for the four trading session. Recall that Monday was declared work-free to celebrate the Muslim holiday of Eid-el-Maulud. Also within the week, the Federal Reservefinally raised interest rate which has put pressure on emerging markets, with funds expected toflow out as global financial market’s outlook is changing.
Mwanwhile, the composite NSEASI gained 889.41 points to close higher at 26,707.10 points, from an opening figure of 25,817.69 points, signifying a 3.44% growth on heavy volume of trades to continue its bullish run. Similarly, market capitalisation for the period closed higher at N9.19 trillion from an opening value of N8.88 trillion representing 3.44% appreciation in value.
During the week under review, the gainers table was dominated by low and high cap stocksthat with strong earnings power and equities that suffered losses to become attractive at their respective prices. The rally in equity prices for the period reduce the negative position of the NSEASI’syear-to-date loss to 6.76%, just as capitalisation equally adjusted for the same period toN565 billion.
Market breadth for last week was positive and strong to support the bull transition as the number of advancers outpaced the decliners in the ratio of 40:19 on a bullish sentiment as the bull took charge.
Stock markets around the world, were mixed to followed the US market close lower over the past week as international stocks suffered setback on the heel of rate hike as investors run for safety cover, while interpreting the impact on the global economy and stocks. Analysts foresee another hike of rate in the new year going by the expected impact of this move to increase before the new government takes over, while anticipating the policies of incoming administration which is likely to push inflation higher.
U.S markets indices, Britain’s FTSE, Germany‘s DAX closed lower, whereas the Japanese Nikkei closed higher for the week.
In the U.S, retail sales data was below expectations, despite risingdue to a drop in auto sales and industrial production especially auto manufacturing. The rate hike would have strong positiveinfluence on the Dollar and treasury yield to move higher, thereby having a mixed impact on the equity market. Financial sector and investment banking stocks may likely be the net gainer from this rate hike as this will influence their performance and bottom line. Manufacturing companies, commodities and materials may suffer some decline. Also, due to increase in interest rate cost of funds will go up.
In Europe, the region purchasing manager’s index was up to 53.9 in December as the economy continue to grow as inflation has resurface in the zone.
In Asia,Chinese government halted bond trading as investors bet that the long credit fueled bull market may be short-lived in no distant time. The rebounded export is expected to further boost the china economy in this season and early next year. Japan stocks were up over economic data that was released recently showsGDP growth of 2.29% during the third quarter which was boosted by strong exports and strong dollar.
Back home, the NSE All Share Index opened the week, trading on a positive note as it recorded 0.98 percent growth, which was sustained on the second trading day to gain 1.29 percent, and continue the trend on midweek trading session to close up again at 1.29 percent but slow sown on Thursday and Friday close positiveat 0.57 percent and 0.56 percent respectively. This bought theweek toa gainof 3.44%. All sectoral indices for the period closed higher, except for the NSE-Insurance, NSE Consumer Goods and NSE Lotus II that close lower by 0.53%, 1.68%, and 0.46% while the NSE ASeM Index closed flat
Market transaction levels for the week, measured by aggregate volume and value of trade for same period wereup respectively by 132% and 18.9%. This was in contrast to the closing levels of previous week, to reflect the bullish sentiment as investors play the Santa Claus rally amidst weak liquidity.
In the week under review, a total of 1.66 billion shares valued at N12.58billion were traded in 12,860 deals, compared with 894.76 million shares valued at N10.63 billion, exchanged in 13,418 deals in the previous week.
During the week also,Honeywell Flourmills and ETI led the advancers’ table with 24.53% and 21.13% gains respectively, while the flip side was topped by Portland Paints and Unilever whichsuffered 13.54% and 12.07s% decline respectively.
Market Outlook
The bull transition as a result of end of the year seasonal trading pattern is likely to slow down this week, with profit booking underway as part of the volatility that had kick off.The Santa Claus is an opportunity for investors and traders to exit positions that are not likely to reward investors in the next earnings season.
Also, investors should take advantage of January effect on equity price to jump into dividend paying stocks that have the earnings capacity to grow it dividend in 2017.
Economic data and Earnings reports areexpected to be very light this season.
Again, the time to combine technical and fundamental analysis for your trading decisions is now, knowing 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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STOCKS TO WATCH
Access Bank, Total, Continental Reinsurance, Presco, Zenith Bank, UCap, UBA, Aiico and Dangote Sugar.
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