Market Update for Week Ended Jan 20 and Outlook for Jan 23
The continued bearish mood and mixed sentiments on the Nigeria Stock Exchange is expected and many factors are responsible for the volatility, especially the January effects as investors sell down some positions to meet one need or another, while seeking to buy into shares with cheaper valuations ahead of the coming earnings season.
Also, there are concerns expressed already by investors about the nation’s economic outlook in the short to medium-term, especially the style of implementation of the 2016 budget which is still running and the manner the government is disbursing funds. There are also concerns about government policies regarding the foreign exchange market with over five different exchange rates existing simultaneously, the Petroleum Industry Bill (PIB) expected to boost activities in the oil and gas sector is still being delay and the power sector still lacks clear cut direction to improve power generation and distribution. These are parts of the structural reforms expected to boost business in the economy, further enhance the ease of doing business, leading to increased national output.
Meanwhile, the composite NSE ASI shed 102.39 points to close lower at 26,223.54 points, from an opening figure of 26,325.93 points, representing 0.40% decline on improved volume of trades to reverse its previous week bullish transition on a buying volume of total transactions for the week was 29%, while selling position was 71%. Similarly, market capitalisation for the period closed lower at N9.02 trillion from an opening value of N9.06 trillion representing 0.44% lost in value.
Last week also, the gainers table was dominated by low and medium cap stocks with strong earnings power and a high possibility of dividend payment, that are equities with low price attraction and high upside potential. The mixed performance of equity prices for the period increased the negative position of the NSEASI’s year-to-date loss to 2.42%, just as capitalisation equally adjusted downward for the same period to N223.87 billion.
Market breadth for last week was weak but positive as the number of advancers outpaced the decliners in the ratio of 30:27 on a mixed sentiment as the bears took charge for the week.
Meanwhile, the unstable global economic outlook for 2017 to 2018 remained, as the Presidency of Donald Trump kicked off in the United States with businesses and investors around the world expecting to be impacted positively and negatively with expected changes in policies under the new administration. The likely political and economic tension between US and China the world’s two largest economies will trickle down to others, especially the emerging markets.
Stock markets around the world were mixed last week, with the US markets closing lower in the week a new president was inaugurated, while international stocks had mixed performance ahead of Trump’s expected reform policy changes and direction.
U.S market indices, Japanese Nikkei and Britain’s FTSE 100 were down, while Germany‘s DAX closed higher for the period.
Still in the U.S, the weather condition has boosted 6.6% increase in utility output and Industrial production growth of 0.8% for December, with manufacturing remaining weak. The housing market was up for December, despite the continued uncertainty in the market and the economy at large.
In Europe, the European Community Bank governor indicated that although the economic climate has improved, structural reforms would be necessary for long term stability in the region.
In Asia, the Bank of Japan chief also suggested that Japan’s economy could improve on the heels of faster U.S growth and a higher dollar valuation as an exporting country.
Back home, the NSE All Share Index opened the week, trading on a positive note as it recorded 0.18% growth, which was short-lived on the second trading day, when it lost 0.36%, which continued at the midweek trading session and Thursday, closing lower at 0.13% and 0.17% respectively. It however reversed on Friday to close marginally up by 0.08%, thereby reducing the week’s loss position to 0.40%.
The NSEASI and all sectoral indices for the period closed lower, except for the NSE Banking Index, NSE-Insurance and NSE Pension that pointed northward at 1.80%, 1.00% and 0.19% respectively, while NSE ASem was flat. This is linked to the fact that investors and traders are positioning in financial services stocks, in anticipation of the coming earnings season.
Market transaction levels for the week, measured by aggregate volume was up by 19.64%, while value of trades for same period dropped marginally by 1.55%. This was in contrast to the closing levels of previous week, reflecting mixed sentiments as investors and market players reposition trades and amide profit taking ahead of the earnings season, amidst subsisting low confidence.
In the week under review also, a total of 1.34 billion shares valued at N8.90 billion were traded in 15,733 deals, compared with 1.12 billion shares worth N9.04 billion, exchanged in 16,482 deals in the previous week.
During the week also, Continental Reinsurance and Mobil Oil led the advancers’ table with 10.91% and 10.46% gains respectively, while the flip side was topped by Forte Oil and Guinness Nigeria, which suffered 10.14% and 8.24% decline respectively.
During the week, Tripple Gee released its third quarterly earnings reports with mixed performance. Also Meyer Plc announced a 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. Also, UACN Property Development Company Plc, through its Stockbroker- Stanbic IBTC Stockbrokers Limited, submitted an application to The Exchange for approval and listing of its Rights Issue of 1,718,750,000 Ordinary Shares of 50 Kobo each at N3.00 per share on the basis of one new ordinary share for every one ordinary share held. The Qualification Date for the Rights Issue was Thursday 19 January 2017.
The oscillating trend in the market is likely to continue amidst window dressing or trading account balance by market players and at the same time, the economy and financial markets await a clear economic policy from the government to give direction and guide investment decisions in the New Year. This is just as investors await the outcome of the year’s maiden meeting of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) for the year, which begins on Monday in Abuja, for guidance in the monetary environment.
However, in our opinion, the volatility in the market may have caused some stocks to trade at valuations lower than their estimated fair values after considering fundamentals
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 the 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.
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STOCKS TO WATCH
Eterna Oil, Aiico, Total, Continental Reinsurance, Presco, Zenith Bank, UBA, and FO
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