NSE Gallop on End of the Month Trading and Q3 Earnings Expectations
Trading activities on the Nigerian Stock Exchange continued on a mixed performance to close last week on a bullish note as many highly capitalized equities appreciated in value to create wealth for investors.
This resulted from traders and investors return to position for end of the month and quarter, especially as the market expects Q3 earnings season to kick off in October. The expected corporate results are very important to market players because they will provide insights into what a company is capable of delivering at the end of the current financial year in most cases.
The market is looking forward to improved liquidity in the system following the promise by government to release funds for implementation of the 2016 budget which is also expected to reflate the economy. Many market analysts and experts however believe that the current policies and expected funds to be injected into the economy are not enough to revival the system and achieve the expected result, meaning that government should think outside of the box and take immediate concrete steps to pull the nation out of recession. This, they believe can be achieved by providing a stimulus package for critical sectors to help re-engineer the whole system. This will then attract and encourage both local and international investors to look the way of Nigeria for investment in form of FDI and FPI.
Meanwhile, the Composite NSEASI gained 388.59 points to close last week at 28,247.07 points, from an opening figure of 27,858.48 points, representing a 1.40% growth on improved volume of trades to continue fortnight’s bull transition. A buying position of 89% of total volume traded for the week with selling volume of 11% supported the bull transition. In the same vein, market capitalisation for the period closed higher at N9.70 trillion from an opening value of N9.57 trillion, representing 1.39% growth.
The up market revealed the changing pattern in the market, despite the current low liquidity with last quarter of the year seasonal trading pattern and strategies informing traders and investors decision to target value stocks selling at a discount. This is in addition to taking position in companies likely to pay interim dividend during the coming Q3 earnings season.
At the same time, investors should not forget the month/quarter-end window dressing by traders and fund managers that may trigger price galloping.
The top advancers log for the week were a mix of high, mid and low cap stocks that had posted strong numbers in the current financial year and had equally suffered price declines due to market trend. And some stocks rallying on dividend declared.
The NSE All-Share Index’s year-to-date is back to negative returns at -1.38%, just as market capitalisation for the same period lost a total of N158.23 billion.
Market breadth for the week under review is still strong and positive, with the number of advancers out pacing decliners in the ratio of 33:25 on a strong volume of trade, amidst a continuing bullish sentiment.
Global markets during the past week heaved a sigh of relief as the Federal Reserve postponed rate hike and other central banks policies, leaving rates unchanged, a situation that encouraged the global markets to close on a positive note, just as news of unchanged rates triggered a fresh rally of crude oil price in the week. Oil prices however slowed down on Friday with news that there would be no more agreement to cut production during OPEC’s meeting holding this week.
As rate hiking remains pending for another quarter, the coming election remains another factor that would determine direction in U.S markets, especially as the presidential candidates kick off debates.
International stocks are reacting positively to the central banks’ policy as many have left rates unchanged to stimulate growth in this unstable global financial market.
MSCI’s broadest index of Asia-Pacific shares outside Japan extended gains in its sixth straight sessions of galloping.
U.S markets indexes, Britain’s FTSE, Germany‘s DAX and Japan’s Nikkei were in the green to close the week. In the U.S, markets, the Fed decision to put interest rate hike on hold fueled the market rally, despite the light economic data and earnings report. The disappointing non-manufacturing index impact has long faded away as Fed looks forward to more positive economic data and indices that support economic recovery that would justify the proposed rate hike.
Smart money that exited the market ahead of last week’s meeting of the U.S Fed are now repositioning, ahead of earnings season in the midst of the coming election in November which has also supported the rally.
In Europe, ECB are putting plans to strengthen its currency so that Britons’ exit from the zone will not have much effect on the system, despite statistics that revealed slow wage increases to the lowest point in the last six years as Brexit has kept businesses and investors guessing. This is because is the volume of business and returns from the region will give direction.
In Asia, stocks price rally to 14-month highs, as the Bank of Japan added a long term interest rate target to its massive asset buying programme during the week. China’s economy continued to strengthen its recovery as government’s spend on infrastructure boosts factory output to confirm retail sales increased and higher property sales.
Back home, the NSE ASI opened the week, trading on a negative note with marginal loss of 0.10%, a situation that was reversed on the second trading session with a gain of 1.38%, this continued at the midweek trading session with slight gain of 0.07%, before sliding on the fourth trading day with 0.11% and bouncing back on Friday to gain 0.29% to close the week with a gain of 1.40%.
The sector indices were in the green, except for the NSE Main Board index, NSE Banking and NSE Consumer Goods which closed in the red with 0.14%, 0.73% and 0.53% respectively while the NSE ASeM and NSE Insurance remained unchanged.
Performance of the NSE ASI revealed positive investors sentiment as volatility finds way back to the market due to end of the quarter and year positioning.
The market’s transaction levels as measured by aggregate volume and value increased by 607.28% and 205.45% respectively, in contrast to the closing levels of the previous week.
In the week under review, a total of 4.33 billion shares valued at N16.80billion were exchanged in 16,797 deals, compared with 611.53 million shares valued at N5.50 billion traded across 9,650 deals in the previous week.
During the week also, the price of PZ Cussons and Tripple Gee were adjusted for N0.50 and N0.03 dividend respectively. The management of Guinness Nigeria Plc proposed a dividend of 50 kobo for shareholders, while Nigerian Enamelware announced the closure and payment dates for its 45 kobo dividend of October 24, and payment date- November 24, 2016.
Conoil and Cutix led the advancers table with 33.48% and 19.41% gains respectively for the week, while the flip side was topped by Caverton and Neimeth after they suffered 13.22% and 12.96% decline respectively.
The market last week continued its bull transition as investors and traders repositioned in low price equities, anticipating the onset of the Q3 earnings season and end of the year expectation, especially as the government tries to fix the economy at this point.
The trend is likely to continue this week due to end of the month/quarter trading account balancing by traders and market player. Also October is the earnings season month as the new NSE rule mandates quoted companies to release their numbers within 30 days after end of a quarter.
Again, economic data and earnings reports are expected to light this week, especially as the investing community awaits the outcome of government’s quick fix policies and actions to revive the economy. Another vital data that investors are keenly looking forward to are the Q3 GDP Data that will be made available on October 1, 2016.
The buying volume of 89% of the total traded for the week and 66% buy volume as at Friday indicates positive investor sentiments.
The time to go technical for your trading decisions is now, knowing the support and the resistant levels. Train yourself and study to know the new approach to the market at this point and going forward.
STOCKS TO WATCH
Okomu, FCMB, CAP, Zenith Bank, UBA, Eterna, UCap, Access Bank and Lafarge Africa.