Market Update and Outlook for the week Ended November 11 2016
Selling Pressure Persists On NSE, Amidst Waning Investor Confidence
The Nigerian Stock market for the period review closed significantly lower, continuing its pullback as investor confidence remains weak, while the fiscal and monetary authorities seem not to be feeding the system with what is needed to turnaround the situation. This has resulted to declines in corporate earnings which continue to fall on the back of rising cost of living that has also triggered the low demand for stocks. The truth also is that Nigerians have no savings or surpluses that can be invested in this recessive economy. Nevertheless, market players are watching keenly, while seeking to reposition their trades and portfolios to ensure they make the best of this bad situation.
The performance of the nation’s stock market which remains a barometer of the economy should pose serious concern to the government, who should walk the talk by providing a few concrete roadmap to revamp the economy. This will therefore enable prospective investors know the direction of the economy and plan accordingly, because every investment is against expectation.
The Composite NSE All Share Index shed 810.72 points to close last week at 26,170.88 points, from an opening figure of 26, 981.60 points, representing a 3% decline on improved volume of trades to continue four weeks of bear market transition.
Buying position of 10% of total volume traded for the week and 90% selling volume within the period. Similarly, market capitalisation for the period also closed lower at N9.01 trillion from the opening value, also representing a 3% depreciation in value.
During the week under review, advancers were a mix of high and low cap stocks that had impressive Q3 numbers, low price attraction and market forces. The decline further pushed the All share Index’s performance year-to-date into a more negative terrain of 8.63%, just as market capitalization has declined for the same period by N841.50 billion.
Market breadth for the period under review was bearish and negative, with the number of decliners outpacing advancers in the ratio of 36:18 on a relative improved volume of trade, amidst the heavy selling pressure and cautious trading that had continued previous week’s trend.
In the international markets, following the shocking proclamation of Donald Trump, the U.S. Republican candidate winner of the November 8 election, had a mixed performance to close the week lower. Already, many see this as an indication of confidence crisis that can come in form of uncertainties in policies or reforms that accompany a change in government. This can however be remedied with time as the colour of the new leadership unfolds. There are strong indications that foreign policy under this new government will change as it comes on board early 2017.
The major U.S markets indices, Britain’s FTSE, Germany‘s DAX and Japan’s Nikkei all closed in the green for the period under review.
Specifically, in the U.S, markets were up following Trump’s victory after anticipating high degree of decline before the election. Expectations that his policy stance from trade protection to fiscal expansion will boost inflation have been driving the surge in U.S. yields at the moment.
Markets are expecting the U.S. Federal Reserve to go ahead with a rate hike in December after U.S. markets quickly stabilized from the initial Trump election shock. The money market futures are pricing in about 75% chance of a rate hike.
In Europe, there is remarkable shift of sentiment, as the market has started to factor in the possibility of rate hike by the European Central Bank for the first time since 2011 as inflation rate reaches two-year high while the economy continued to struggle with growth, a situation that may trigger loose monetary policy.
In Asia, stock prices were mixed to close the week lower, as emerging market currencies lost value due to investor concerns that should the U.S go ahead with rate hike in the coming government this will trigger capital outflow from the region. In China household debt has become a rising threat to its growth.
Back home, the NSE All Share Index opened the week, trading on a negative note with a loss of 0.35%, a trend that was sustained through the second and third trading day, shedding 1.95% and 0.72% respectively. This was however reversed on the forth trading session with a gain of 0.18%, which was short-lived on the last trading day of the week, losing 0.19% to close the week with a loss of 3%.
However, all sectoral indices closed in the red, with exception of the NSE Asem that was flat.
Market transaction levels for the week, measured by aggregate volume was up by 224.52%, while value traded for same period was down by 7.48%, in contrast to the closing levels of the previous week, to reflect the selling pressure and caution trading as a result of falling confidence in the economy and market.
In the week under review, a total of 2.85 billion shares valued at N7.42 billion were exchanged in 16,065 deals, compared with 873.84 million shares valued at N8.02 billion, traded across 15,944 deals in the previous week.
During the week also, UPDC Real Estate Trust announced a dividend of N0.23 for its units holders. The late filer Pharma Deko and Tourist Company Nigeria made their quarterly reports to the market, while Tourist Company’s came alongside its full year result.
The exchange announced the suspension of shares of Ikeja Hotel Plc, just as it was notified by directors of UAC of Nigeria PLC of the mandatory take over of up to 2,000,000 ordinary shares of Portland Paints and Products Nigeria Plc at the price of N4.47 Kobo per share
Airline Services and Wema Bank led the advancers’ table with 19.69% and 10.53% gains respectively for the week, while the flip side was topped by Cement Company of Norhern Nigeria (CCNN) and Nahco, which suffered 14.34% and 14.18% decline respectively.
The selling pressure and cautious trading of last week is likely to slow down as gradual repositioning of portfolio and activities of bargain hunters taking advantage of the low equity prices to take position.
The market this week is likely to oscillate, depending on market forces and positive news from economic managers or government, at a time the consumer price index is expected to hit the market this morning.
Economic data and earnings reports are expected to be very light this week, ahead of Q3 GDP estimates report and the last Central Bank of Nigeria Monetary Policy Committee (MPC) meeting for the year.
Again, the time to combine technical and fundamental analysis for your trading decisions is now, knowing the support and the resistant levels of any trade you want to take. Train yourself and study to know the new approach to adopt at this point and going forward.
STOCKS TO WATCH
Presco, Total, Aiico, Zenith Bank, Eterna, UCap, FcmB, GTBank and Dangote Sugar.