Mixed Performance Ahead as Profit Taking Takes Hold of Market

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There’s no doubting the fact that the market is not that bullish but that is not to think of a crash or even near that, notwithstanding the fears of 2019 elections that seem to be driving investment decisions of major operators and investors alike.

Equity prices feed on information but please note, of all factors that do act as catalysts on market performances, earnings and key elements in a company’s released reports cum forecasts and projections emanating from such reports are the most critical hence, earnings seasons in all markets across the globe remain the most active and when the season is over, momentum slows down and Sir Isaac Newton’s first law of motion sets in. Remember, Sir Isaac Newton in his first law of motion had stated that ‘every object will remain at rest or in uniform motion in a straight line unless compelled to change its state by the action of an external force. Let’s look at the way the market performed last week.

THE MARKET LAST WEEK
Four of the five trading sessions- Monday through to Thursday of last week ended in the red. Friday was favourable. At the end of the week, the broad index indicated a decline of 0.48% WoW, 0.6% for the month and 7.3% YtD. Below are the major gainers and losers and other statistics.

GAINERS ABOVE 5%

LOSERS ABOVE 5%

OTHER MARKET STATISTICS


SIGNIFICANCE OF TABLES

• Though were more losers last week in comparison with the previous week, quality of gains was superior. Whereas the highest percentage gain last week was 29.75 with two others recording gains between 20 and 27%, highest loss for the week was 14.29%.
• Growth in deals, volume and value for the week indicate resistance.
• It is also visible that sector indexes were not all up or down which suggests a mixed performance.

FACTORS AGAINST THE MARKET

• 2018 earnings season is over. The market is dry of information. Volatility will subsist till July when Q2 earnings will be released to the market.
• The fears of 2019 elections in April of the year will continue to inform investment decisions. Fear is a major enemy of the market.
• The fears that global price of crude might fall in the wake of US President’ on deals with Iraq. If that comes true, income to the country shrinks.
• APC primaries and ward elections and the attendant crises. This if not checked could dovetail into higher political crisis in 2019.

FACTORS FOR THE MARKET

• Previous favourable global crude oil performances
• Ability of the federal government to increase foreign reserves
• Curtailed lending rates
• Curtailed interest rates
• Curtailed inflation
• Positive Q1 earnings
• Positive projected Q2 earnings
• Stable currency
• Naira/Yuan swap with China

POSSIBILITIES THIS WEEK

• Closing bids and offer sizes Friday tend towards a weak opening for the week
• Current position of technical indicators tends towards a mixed performance for the week. Consequently, the five days of this week will be shared between the red and green colours with at least two days of green performances all things being equal.

STOCKS TO WATCH FOR THE WEEK

• ACCESS BANK PLC: Year to Date, the stock had only tested a low of N10.43 from the N10.45 with which it opened the year. Subsequently, it has refused to come below N11. Closing at N11.25 Friday with good bids sizes is indicative of positive open Monday. Current position of indicators shows a mixed week with overall likely positive margin no matter how low. Fundamentally, Access remains solid. Its latest strategic approach to retail banking stands to pay off in the medium term.

• AFRICA PRUDENTIAL PLC: Fundamentally sound company. It has done so well in resisting losses. It might shed a little in early trading this week after which a gradual recovery is possible. It has not come below N3.85 this year from an open of N4.22 kobo.

• FIDELITY BANK PLC: Has so much vacillated this year, touching a low of N2.09 from an open of N2.46. The attraction at current price of N2.52 is that it is about its lowest level in the year whereas it had sold at a high of N4.33 irrespective of its encouraging earnings. Please note, lower price regime in the face of improving earnings is only a short term phenomenon. For this week, Fidelity will gain and lose with possibility a gain.

• FIDSON: Though the price might see one or two days of gains in the week, the odd favours a lower price to close the week. It remains however, one of the stocks to watch out for this week. N3.70 where it opened the year has been its lowest too for the year. Raising N6billion to fund its operations in 2017 and increasing 2017 Q2 profit by 1,077% because of the ensuing expansion are factors that would continue to sustain the stock’ price.

• GUARANTY: This stock saw over N12.3bn stake in it just last week to emerge by far the highest in value. It was the second in volume of trades with over 272million units exchanging hands, yet, there were excess bids at the close of trading Friday. These are measures of strength. Having recovered from the loss of 2008 market crash and about the only genuine one of such in its industry, confidence continues to keep the stock price ahead of others. Seeing that the low for the year is around N39.05, current price level remains moderate enough though it is currently trending down.

• TRANSCORP: The stock did so well this year when it touched N2.80. It’s current price of N1.64 is only slightly higher than its lowest of N1.44 for the year. With possibilities in its power arm and existing hold of investment in oil with holdings in hospitality, the lower the price the more the purchase should be applied, investing for the long term in Transcorp.

• UCAP: The stock might need one or two more weeks of price shed to become attractive enough for a purchase. For now, keep tab on it. For this week, performance is bound to be mixed with likely strong open Monday.

• ZENITH BANK PLC: The stock is bound to rise but this will come like a thief in the night. Its figures are looking bright relative to current price. it is only a matter to time. N25.64 was its open price for the year and indeed the lowest it has seen too though it rose to touch N34.20. Indicators are showing likelihood of price revolving around same figure for awhile all things being equal.

• VERITAS KAPITAL INSURANCE PLC: Its price has galloped as the name change from Unity Kapital Insurance took effect. Keep a tab though a purchase below current price level makes things better.

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