Market Update for Week Ended August 25 and Outlook for August 28-31
The nation’s equity market last week was highly volatile to close lower with technical indicators mixed, to confirm the trend direction due to wavy behavioral pattern of the market amidst sustained profit taking and positioning for interim dividend, helped by impressive numbers from first-tier banks hitting the market. Last week also, the share price of Zenith Bank and Guaranty Trust Bank were adjusted for dividend offered by their directors, further putting pressure on the market.
During the week too, the market reacted to the release of half-year audited numbers by Access Bank, Ecobank Transnational Incorporated (ETI) and UBA which came mixed, a situation market players had factored into their share prices along with the dividend by all but ETI. This situation in the market may not last for too long because Q2 financials from these banks are impressive and strong to further drive their prices because many are still selling at a discount to book value with high margin of safety.
The mixed sentiments in the last two trading weeks of August is a reflection of cautious trading as investors cash out some gains after seeing the Q2 numbers in a bid to rebalance their portfolios ahead of the third quarter earnings season. Also, now that the numbers beat expectations, necessitating a revaluation of stocks, a situation that would trigger another round of rally ahead of possible economic news and data that are positive and would stimulate the market and reverse activities in the month of September when traders and investors would begin to position for the last quarter of the year- months that are usually full of activities.
The volume index for the period under review was 0.95 with buying position at 26% and 74% selling volume of the total transaction as volatility continued ahead of month end.
Meanwhile, the composite NSE All Share Index for the week shed 274.10 points to close at 36,646.46 points, from an opening figure of 36,920.56 points, representing a 0.74% decline on a high volume of transactions. The intra week breakout of the psychological line of 37,000 to 37,088.44 before pulling back to low of 36, 491.93 and retrace up to close at period marginally lower at 36,646.46. Similarly, market capitalisation for the period closed lower at N12.63tr from an opening value of N12.73tr, representing a 0.74% value loss in investors’ portfolio.
The advancers’ log for the week was dominated by low cap stocks after the market had suffered decline as a result of profit taking by investors and traders, thereby creating opportunities for portfolio adjustment ahead of Q3 end that will usher in the final lap of the year.
Price depreciation recorded by medium and high cap stocks during the period reduced the NSEASI’s year-to-date return to 36.38%, just as that of market capitalisation stood at N3.38tr, representing 36.6% gain from the year’s opening value.
Market breadth for the period was negative with the number of decliners outnumbering advancers in the ratio of 40:32 on a high volume of trades to reflect investor’s interest in dividend paying stocks while traders are indifferent.
Stock markets around the world were mixed over the past week, as the price oil continues to fluctuate with hurricane Harvey, now sweeping across Corpus Christi part of the U.S state of Texas threatening oil refineries in the Gulf of Mexico. The global economy benefited from continued liquidity injection by the European Central Bank and Bank of Japan, that supported key global asset prices (keeping stocks up and rates down). Recent moves to ease stimulus may halt recovery in the global economy.
Japan’s Nikkei was down for the period while Germany‘s DAX, Britain’s FTSE 100 and U.S market indexes closed north, despite the weak new and existing home sales report, showing that new home sales fell sharply lower than expected to an annualized rate of 571,000 while existing home sales declined 1.3% to annualized rate of 5.44m. The primary driver behind the stocks rally has been better than expected Q2 earnings and higher expectations for tax reform,
In Europe, the ECB plans to phase out its massive stimulus programme early next year which could slow down the region’s strong economic recovery. The UK’s Brexit plan is progressing and likely to influence its economic data negatively, especially as recent inflation figure is pointing up. In Asia, Japanese price pressure is building up with core consumer price rising at a 0.5% year-on-year rate, this is the fastest since march 2015, while remaining well below the BOJ’s 2% target. Also, economists in China are concerned that the crackdown of backdoor borrowing by local governments could put a drag on growth.
Back home, the benchmark Index opened the week on a negative note, as traders took profit from the two previous trading sessions of gains that led to a loss of 0.91% on Monday, which was reversed on Tuesday and was sustained in midweek trading sessions to post 1.03% and 0.26% gains respectively. This was however short-lived when on Thursday the market lost 1.30% to pullback, before rebounding on Friday, reducing loss for the period to 0.74%.
The All Share Index and sectoral indices for the period were down except for NSE Main Board, NSE Banking and NSE Consumer Goods that were up by 1.34%, 0.31% and 2.38% respectively to close the week.
The week’s activities, measured by aggregate volume and value, were mixed as volume was up by 10.79% to 1.54bn shares, which was higher than previous week’s 1.39bn shares, while value was down by 3.27% to N24.22bn, from N25.04bn.
At the end of the week’s trading, Caverton topped the advancers’ table, gaining 16% to close at N1.16 per share on the back of its impressive Q2 numbers and news of a five-year logistics support contract it clinched to provide aviation services with a two-year renewable option with Chevron Nigeria Limited. In a letter to the Nigerian Stock Exchange (NSE) on August 18, 2017, Caverton said the contract would be serviced with 11 helicopters for a 24-hour, seven days a week guaranteed operation. Last week also, Dangote Flour Mill followed Caverton, after notching 10.33% gain to close at N6.62 each on market forces and strong Q2 numbers. The decliners’ table on the other hand was led by Double One Plc, which lost 14.46% to close at N192.55 on market forces and profit taking, ahead of the 14.22% drop by Conoil, which closed at N29.07 per share, also on market forces.
During the week the management of Paint & Coatings and Avon Crowncaps Containers submitted an application to the exchange for a scheme of arrangement with their shareholders, preparatory to the delisting of its entire shares in issue from the Daily Official List. Also, the share price of Zenith Bank, Guaranty Trust Bank, Custodian Allied Insurance and Mcnicholes were adjusted for dividend proposed by their boards.
This is the last trading week of August and ahead of month-end trading account balancing and the Salah holiday slated for Friday, following which it would not be out of place if we expect that the volatility already seen would continue as profit taking, while investors engage in portfolio rebalancing for September on the strength of impressive half year corporate earnings ahead of Q3 earnings season in October, even as inflation data for July and second quarter GDP figures are being awaited.
Bearing all these in mind, investors should position in stages in valued stocks with high upside potentials, despite their current prices on the exchange as many are still undervalued.
Again, the time to combine company fundamental data and chart pattern for your trading and investing decisions is now, to enable you know 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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