Bear Camp Expands for Six Straight Week On Dwindling Confidence in the Economy
The bearish sentiment in the market has reached its peak as daily, weekly and monthly sell position of the total volume traded for these periods remained above 90% as revealed by buy and sell volume indicator. For traders opportunity to buy low while for many retail investors time to stand on the sidelines and watch the knife falling. The outcome of MPC meeting as to retention of all monetary policy instruments unchanged has further depressed the equity market despite the seeming resistance the index showed around 25,401.27 during the week before given up to continue it down trend. Also on the backdrop of inflation at 18.33% and lingering negative GDP growth many investors are becoming more cautious than before. Given the large increase in bearish sentiment, bullish sentiment has disappeared of course. In this week’s survey, bullishness came in at 9% which is the lowest reading since April this year. While not nearly as notable as the bearish sentiment, the trend of higher reading that has been in place since late last year has clearly been broken.
Meanwhile, the composite index NSEASI shed 204.15 points to close lower at 25,333.39 points, from an opening figure of 25,537.54, points, representing a 0.80% decline on the back of a low volume of trades to continue the six weeks bearish streak. Also, market capitalisation for the period closed lower at N8.72 trillion from the opening value of N8.79, representing a 0.80% depreciation in value.
During the week under review, the advancers table was dominated by low and medium cap stocks having low price attraction and growth potential, while the high cap stock was as a result of its strong earnings power and increase of institutional investor holding in the company recently. The decline in equities prices for the period re further pushed the NSEASI’s year-to-date loss to 11.55%, just as capitalisation has declined for the same period by N1.10 trillion.
Market breadth for last week was flat trying to breathe out as the number of advancers equals decliners in the ratio of 27:26 on a average low volume of transactions, amidst the mixed sentiment of bull and bear. It must be noted here that the negative economic indicators and Monetary Policy Committee (MPC) voted to retain the benchmark Monetary Policy Rate (MPR) at 14%, CRR at 22.5% and liquidity, 30%. With decline in money supply has further put pressure on the economy and stock market, hoping that the government will awake to its responsibilities with effective fiscal policies that will be impactful in no distance time.
International markets during the period were mixed, close higher, despite the seeming capital outflow from emerging markets as US currency wax stronger to boost its bond market as funds are chasing high yields. Trumponmics in US is likely to influence positive the personal finances of many people and the economy then boosting companies earnings with his policies.
U.S markets indexes, Britain’s FTSE, Japan’s Nikkei and Germany‘s DAX closed higher during the week.
The U.S. manufactured goods and consumer sentiment indicators were up in October to support strong economy that propel earlier rate hike before the year winds down. This is to complement the expected Trump’s reflationary policies, as markets have moved towards U.S.-dollar based assets at the expense of emerging nations. With the appointment economic team the president elect is preparing to hit the ground and start run immediately he is installed as the president come January 2017.
In Europe, latest data release reveal that business activity grew at its strongest pace this year November which prompted companies to employ at their fastest pace since 2008. UK economy remain relatively strong as consumer spending is looking up meaning the exit plan from the zone has not affected spending.
In Asia, despite the nervousness and cautious mood of investors, Japan economic data that was released recently shows GDP growth of 2.29% during the third quarter which was boosted by strong exports. China’s blue chip CS1300 index advanced to near 11 month peak as the yuan touches its lowest in six years.
Back home, the NSE All Share Index opened the week, trading on a negative note as the trend sustained throughout the two day of the MPC meeting as investors were waiting for the outcome, but revered on the mid-week trading day with a gain of 0,18% and it was short live to turn negative on Thursday and Friday to close the week with a loss of 0.80%. All sectoral indices for the period closed red except for the NSE Banking index and NSE Consumer Goods that were in green with 0.02% and 0.42% respectively on low degree of losses while NSE Asem that remain flat.
Market transaction levels for the week, measured by aggregate volume was down by 22.36%, while value of trade for same period was up by 18.75%. This was in contrast to the closing levels of previous week, to reflect the mixed sentiment and fear of worsen economic situation that affected volume of trade as liquidity remain tight.
In the week under review, a total of 639.44 million shares valued at N6.46 billion were traded in 11,799 deals, compared with 823.55 million shares valued at N5.44 billion, exchanged in 11,634 deals in the previous week.
During the week also, the share price of Total Nigeria Plc and Eterna Plc were adjusted for dividend. FCMB, Interlink Nigeria Plc, May & Baker released their quarterly earnings reports to the market while Road Nigeria Plc and RT Briscoe Nigeria Plc made their full year reports available.
Flourmills Nigeria Plc and Africa Prudential Registrar led the advancers’ table with 20.31% and 14.51% gains respectively, while the flip side was topped by Forte Oil and Okomu Oil which suffered 24.04% and 13.81% decline respectively.
The rate of decline in stock prices last week were as mentioned in our analysis despite the negative GDP growth and MPR retain at 14%.
The market this week is likely to be mixed as the month ends within the week were window dressing by market players to balance their trading account may influence prices.
Economic data and Earnings reports are expected to be very light this week.
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
Presco, Total, Aiico, Zenith Bank, FO, UCap, UBA, GTBank and Dangote Sugar.