Market Update for Week Ended July 28 and Outlook for July 31—August 4
Trading activities on the Nigeria Stock Exchange last week was seriously bullish being the peak of the second quarter earnings reporting season when quoted companies are statutorily required to submit their quarterly earnings reports to the investing community, which ends on Monday, July 31, 2017.
During Friday’s session, the market expectedly rode on the last minutes momentum of influx of corporate earnings, with over 50 listed companies jostling to make available their scorecards, which came with mixed performance.
The impressive numbers from fast moving consumer goods and industrial sector players supported the positive economic data, confirming the hints of economic recovery that has been propelled largely by the foreign exchange policy slant of the Central Bank of Nigeria (CBN), which has resulted in regular weekly intervention. This has significantly boosted confidence among foreign and domestic investors, as well as consumers. In the financial services sector, the first tier banks are expected to submit their score-cards to the market in August as most of them have announced, because of plans to audit the reports, as well as seek CBN approvals as required.
The three-week uptrend momentum was short lived on the last trading day of the week as end of the month profit taking hit the market, after financials of second tier banks and petroleum marketing stocks missed expectations. The volume index for the period under review was 1.54 with buying position at 78% and 22% selling volume of the total transactions as investors and traders continue to position in blue chips stocks, while seeking to protect their portfolios. In the process, they are building a hedge of safety ahead of end of earnings reporting season portfolio reshuffling on the strength of the recently published Q2 numbers, as well as the future prospects of the companies of which Q3 numbers will be factored in the current market value.
Meanwhile, the composite NSE All-Share Index for the week gained 2,844.34 points to close at 36,864.71 points, from an opening figure of 34,020.37 points, after hitting intraweek high of 37,655.46 and low of 33,999.14, representing 8.40% growth on a huge volume of transactions. The index broke out multiple psychological lines of 35,000, 36,000 and 37,000 to new three-year high that confirm a bullish run which affected all the sectors represented on the exchange.
Similarly, market capitalisation for the period closed higher at N12.71tr from an opening value of N11.73 trillion, representing a 8.36% value gain in investors’ portfolios to wipe out a two-year loss position.
The top performing stocks for the week was dominated by high cap stocks, as investors and traders hedge their risk in defensive stocks that are mainly blue chips with good dividend payment history.
Equities price rally during the week pushed the NSEASI’s year-to-date return to 37.17%, just as market capitalisation appreciated by N3.27tr, representing a 37.76% gain from the year’s opening value.
Market breadth for the period was positive with widen number of advancers outnumbering decliners in the ratio of 51:23 on a huge volume of trades to reflect a buying market despite the pullback on Friday.
Stock markets around the world were mixed to close lower despite the earnings season, irrespective of the unstable oil price and the decision of the Feds to leave interest rate unchanged at its last meeting. Japan’s Nikkei, Britain’s FTSE 100, Germany‘s DAX and U.S market indexes were mixed as expectation for a wind down of the stimulus package any moment from now in US remains a source for concern for investors. The Feds remain optimistic that inflation will improve, a situation that boosted expectations for rate hike to levels that would have a neutral effect on the economy.
In Europe, economic confidence has soared to its highest level in a decade as the region regains momentum. In Asia, China’s confidence among small and medium sized companies posted a strong rebound in July as steel traders and producers expressed confidence in the economy. In Japan, inflation matched expectations as consumer prices rose by 0.4% year-over- year. That however remains well below the BOJ target of 2%.
Back home, the All-Share Index opened the week on a positive note, gaining 1.86%, which was sustained on Tuesday, Wednesday and Thursday when it gained 2.54%, 3.40% and 1.39% respectively. The market suffered a 1.02% pullback on Friday to close the week higher at 8.40% gain.
The ASI and other sectoral indexes for the period closed the week higher, except for NSE ASeM closed flat.
The week’s transaction, measured by aggregate volume and value, were down by 39.12% and 12.18% respectively to 2.21bn shares, down from the previous week’s 3.63bn units, worth N30.64bn, compared to previous week’s N34.89bn.
At the end of last week’s trading, Conoil topped the advancers log with a gain of 21.41% to close at N36.40, driven by market forces and expectation of better Q2 numbers, followed by Presco’s 20% gain to close at N73.20 also on expected Q2 numbers. The decliners’ log on the other hand was led by Cadbury Nigeria and Morison Industries, which lost 18.17% and 17.58% to close at N10.45 and N1.36 respectively, following the unimpressive numbers posted by Cadbury.
The market is expected to be mixed this week as few companies will release their numbers ahead of the July 31 deadline and profit taking from the current uptrend to watch the next trend after the end of the reporting season.
Bearing all these in mind, investors should position in stages in valued stocks with high upside potentials, despite their current prices on the exchange.