Market Update for the week ended January 13 and Outlook for Jan 16
For the second consecutive week, trading on the floor of the Nigerian Stock Exchange that was characterized by up and down, managing to close on a mild positive note, largely with the help of banking stocks, especially those that already notified the investing community of board meeting to their discuss 2016 financials and then recommend payment of final dividend.
The relative low volume of trade within the period is a reflection of the weak macro-economic fundamentals that remain sources of serious concern for foreign and local investors, as the economy and financial market await policy direction from the government in clear terms to guide investment decisions in the New Year.
The Composite NSE All-Share Index gained 74.54 points to close last week at 26,325.93 points, from an opening figure of 26,251.39 points, representing a 0.28% growth on a low volume of trades that signal cautious trading and investing on the part of the investing community with the rate of up and down movement in the market increasing. The buying volume of total transactions for the week was 21%, while selling position was 79% to reverse the previous week’s bearish sentiments. Similarly, market capitalisation for the period closed higher at N9.06 trillion from an opening value of N9.03 trillion representing 0.28% appreciation in value.
During the week under review also, the gainers table was dominated by low and medium cap stocks with strong earnings power and equities with high possibility of dividend payment in the coming earnings season. This has combined with the low valuation of the stocks, making then attractive to the investing public. The rally in some equity prices for the period reduced the negative position of the NSEASI’s year-to-date loss to 2.04%, just as capitalisation equally adjusted for the same period by N176 billion.
Market breadth for the week was negative and mixed to support the reversed trend as the number of decliners outpaced the advancers in the ratio of 34:31 on a mixed sentiment as the bull and bear struggle for dominion.
Meanwhile, stock markets around the world were mixed with the US market closing lower over the past week as international stocks had mixed performance on the heels of preparations by US president-elect Trump to assume office this week. The impact of the expected change in policies on the global economy and stocks is unclear now. Analysts foreseeing some of the policies may be in favour of investors despite the hike in rate.
U.S markets indices, Japanese Nikkei were down whereas Britain’s FTSE 100 and Germany‘s DAX closed higher for the week.
In the U.S, retail sales and producers prices are up to 0.6% and 0.4% respectively, the rising data was above expectations to confirm the positive economy. Financial sector and investment banking stocks may likely be the net gainers from the rate hike and policy of the incoming government to influence their performance and impact bottom line. Manufacturing companies, commodities and materials may suffer some decline. Also, due to increase in interest rate, cost of funds will go up.
Back home, the NSE All Share Index opened the week, trading on a positive note as it recorded 1.25% growth, which was short-lived on the second trading day to lost 0.88%, but reversed at the end of the midweek trading session to close up marginally by 0.15%. But decline on Thursday and Friday to close negatively at 0.21% and 0.02% respectively. This left the week with a modest gain of 0.28%.
All sectoral indices for the period closed higher, led by NSE Banking Index with 3.27%, except for the NSE Main Board, NSE-Insurance, NSE Consumer Goods, NSE Oil/Gas and NSE Lotus II that closed lower by 0.39%, 0.34%, 1.82%,3.15% and 1.87% respectively, while traders took profit and repositioned their portfolios in anticipation of the coming earnings season.
Market transaction levels for the week, measured by aggregate volume was down by 74.1%, while value of trade for same period rose by 22.49%. This was in contrast to the closing levels of previous week, to reflect the mixed sentiment as investors and market players repositioned trades ahead of earnings season amidst weak liquidity.
In the week under review, a total of 1.12 billion shares valued at N9.04 billion were traded in 16,482 deals, compared with 4.32 billion shares valued at N7.38 billion, exchanged in 9,330 deals in the previous week.
During the week also, Diamond Bank and Okomu Oil led the advancers’ table with 23.33% and 10.27% gains respectively, while the flip side was topped by Cutix and 7-Up Bottling Company which suffered 17.39% and 13.64% decline respectively.
During the week, Guinea Insurance release its belated quarterly earnings reports with mixed performance. Also Meyer Plc announced its Rights Issue of 291,489,840 Ordinary Shares of 50 Kobo each at 75 kobo per share. Acceptance list opened on Monday, January 9, 2017 and closes on Friday, February 10, 2017.
Market Outlook
The National Bureau of Statistics (NBS), on Friday released the December Consumer Price Index (CPI) showing that inflation rate rose 18.55%, representing a 0.07% rise from November’s 18.48%. This is the first negative macroeconomic indicator in the New Year as the nation’s external reserve remains slightly on the rise on the strength of seemingly rise in crude oil price in the international market.
The oscillating trend in the market is likely to continue as the economy and the financial markets await a clear economic policy from the government to give direction and guide investment decision in the New Year. The economy’s managers should at this point start rolling out policies that will support the relatively improving Purchasing Managers’ Index and CPI for the month of December to revamp the economy again.
Also, investors should take advantage of January effect on equity prices to jump into dividend paying stocks that have the earnings capacity to grow payout this year as earnings season beckons.
Economic data and Earnings reports are expected 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.
To join our webinar every Friday 8pm to 9pm, WhatsApp group and get market updates, SMS web*name*email to 08124050850
STOCKS TO WATCH
Eterna Oil, Aiico, Total, Continental Reinsurance, Presco, Zenith Bank, UBA, and Dangote Cement.
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