Market Update for July 25
Nigeria’s stock market indices had a strong bull-run Tuesday with a gap up at the opening, as they formed consolidation patterns in the early hours, held support, and then had a strong midday rally. The index made much progress in the last few hours to consolidate with nice gains and moved higher on high demand for stocks with traders and investors taking last minutes positioning as the market continued to react positively to the impressive numbers released so far by quoted companies.
Meanwhile, despite the decision of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to leave the benchmark Monetary Policy Rate (MPR) unchanged at 14%, at the end of its two-day meeting which ended on Tuesday, the continued appreciation of the Naira and improved liquidity in the foreign exchange market has supported inflow of the greenback into the economy and indeed the equity market. This has so far also impacted positively on economic data, such that the CBN is saying it is early in the day to ease monetary policy on the back of the much expected fiscal reforms, structural changes and delayed implementation of the 2017 budget, which now threatens the much expected economic recovery. The Federal Government must therefore at this point brace up to the nation’s economic challenges and do the needful to sustain the recovery pace. One way of doing this would be to put the right policies in place to drive the administration’s much celebrated Economic Recovery & Growth Plan.
Also, with the proposed Federal Government promissory note to local contractors expected to reduce high debt that is now slowing down execution of many projects across the country because banks are not ready to give these contractors facilities any more. With these notes, contractors will have access to fresh funds, knowing that the government will not disappoint in terms of redemption of the promissory note at maturity.
The day’s volume traded index was 1.41; buying position, 93% and selling volume, 7% of the total transaction. The sectoral indexes were higher as investors and traders took position in different sectors with expectation of their Q2 scorecards.
The composite NSE All-Share Index gained 880.48 basis points to breakout its two-year psychological line of 35,000 on a huge volume to close at 35,533.00 from an opening figure of 34,652.52 points, representing a 2.54% growth, while volume transacted for the day was higher than previous day’s. Similarly, market capitalisation went up by N303.35bn to close at N12.25 trillion from the opening value of N12.02tr, representing a 2.54% growth to wipe away two-year loss position in investor’s portfolio as the market continue recovery move.
The upturn in share prices of Nestle, UBA, Forte Oil, Okomu Oil, Zenith Bank, Access Bank, Stanbic IBTC, Dangote Cement, Presco, Oando, Lafarge Africa, Flourmils and others boosted the All-Share index year-to-date returns to 32.20%. Also, market capitalisation over the same period improved by N3.01tr, representing a 32.68% growth over the year’s opening value.
Market breadth on Tuesday was positive as the number of advancers outweighed the decliners in the ratio of 27:18 on a huge volume of trade to continue the 14 straight days of bullish trading. Market activities in terms of volume and value were up by 74.79% and 49.32% respectively at 513.45m shares worth N5.90bn, from the previous day’s 293.75m units valued at N3.95bn.
Transactions in the shares of UBA, Access Bank, Zenith Bank, Fidelity Bank and Transcorp topped the volume chart to close the day’s session.
At the end of trading activities, UBA topped the advancers’ log, gaining 10.16% to close at N10.41 each on the back of its expected Q2 numbers and brighter prospects as it consolidates operations in various Africa countries. It was followed by May & Baker with a 10% gain to close at N3.19 per share, on market forces and expected impact of government policy on the health sector to influence its numbers going forward.
On the flipside, Unity Bank led the decliners’ log after dropping 8.96% to close at N0.61 on profit taking activities of investors and traders, ahead of Morison’s 8.92% decline to close at N1.43 per unit on market forces as this company has been inactive on the exchange.
As trading opens this morning, the market is expected to continue riding on the prospect of more Q2 numbers being released amidst countdown to the end of this earnings season. Already, investors and traders have reacted to the mixed numbers released so far, receiving positively to surprises, while treating disappointing earnings otherwise.
However, it is advisable to expect a blend of surprises and disappointment from the companies reporting their numbers, even as investors need not panic if any pullback occurs now due to profit booking, if they have taken position based on strong numbers and future prospects of any stock. You should therefore fix your gaze on the actual numbers and bail out when expectations are not met, thereby cutting their loss.
Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year’s trading activities, especially now that prices of stocks are looking up ahead of the improving economic fundamentals, if the numbers will support the price reversal or continuation.
It is time to use your technical tools to take decision by knowing the support and resistant level to reposition or exit any position.
Be reminded once more that industry potential is very important when picking a stock, because there are factors that are sector-specific and would naturally impact positively or negatively on companies operating within such an industry, especially now that the economy is recovering. For stocks that should be on your shopping list to buy in this oscillating market or pullbacks sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
In the game of life there are two groups of people – those who focus on short term gains are prepared to make short term sacrifices and invest time improving themselves to get the huge improvements for the rest of their life.