- Strategies to transverse
- Budget 2018 and the market
- Elections 2019 and the market
- How to pick profitable stocks
- How to avoid pitfalls
LAST WEEK REVIEW:
Nigerian bourse at the close of first trading session last week was weak, not only in the -0.84% index performance but also in just eight stocks on the gainers’ chart against thirty two losers. Tuesday was somewhat better though still largely weak. It was a decline of 0.15% with twelve gainers and twenty six losers. Price performances of Dangote Cement, Nigerian Breweries, Nestle and Zenith apparently aided the 0.93% index performance recorded Wednesday while market remained down for the remaining two days of the week.
At the close of trading session Friday May 18, 2018, the All share Index of the Nigerian Stock Exchange standing at 40,472.45 for the week had lost 1.34%. Significantly, last week being the twentieth in the year 2018 was also the eleventh week of losses so far recorded in the year and the second records of three days of straight losses within a week. All these notwithstanding, trading activities on the floor of the Nigerian Stock Exchange continue to show resilience as intermittent increase in deals, volume and values of trades are recorded.
Please find below some records of trades for last week:
20 GAINERS FOR THE WEEK:
LOSERS ABOVE 5% LAST WEEK:
- GAINERS AND LOSERS: Aided by NSE’s rule on pricing, low priced stocks were prominent on both the gainers and losers charts with gains and losses within same percentage range. Numbers of gainers in the week were fewer than the record of the previous week whereas losers were higher in number. Increase in number of unchanged stocks in price is indicative of the fact that a number of sellers are wary while bargain hunters continue to price low.
- SECTOR ANALYSIS: Most sectors last week were down. The trend surprisingly does not leave behind the oil and gas index which fell also by 2.64% despite increasing price of crude oil in the global market. Banking index too was down 2.80% irrespective of the fact that there are no pressures from the regulator whatsoever. Despite the fact that three insurance stocks appeared among the highest percentage gainers in the week under review with two of them leading the entire market, insurance index was down 0.80%.
- DEALS, VOLUME AND VALUE: Irrespective of the seeming sell off, a number of individual stocks of which Zenith and Guaranty are prominent have stood their ground and, in the process, commanded volumes and values.
POSSIBILITIES THIS WEEK:
- The market is still largely weak. Those selling will only look for general optimism to so do whereby the optimists will be mopping up the quantities being shed. That being the fact, closing bids and offer sizes Friday is indicative of improving optimisms. If sustained, though the market this week might not be that super bullish but the decline will not be strong enough to depress concerned souls.
- Technically, the odd favours a mixed performance whereby one or two days will be up and vice versa. Quite a number of individual stocks on the charts are either approaching or at oversold levels. A further loss can only lead to price reversal even if it would soon be pulled down by bargain hunting.
BUDGET 2018, ELECTION 2019 AND THE STOCK MARKET:
PASSAGE AND IMPLEMENTATION OF 2018 BUDGET:
If President Muhammadu Buhari finally ascents to the 2019 budget as passed by the Nigerian senate, the sum of N9.12 trillion will be pushed into the Nigerian economy through various channels. This is an increase of N508billion from the N8.612trillion originally proposed by the President. The much so far spent from this amount can’t be ascertained until the ministry of finance makes a report but whatever the amount is, there are less than seven months to end the fiscal year within which this amount is expected to be pushed into the Nigerian economy and about one year the Buhari administration will either be continuing or hand over to another government.
Historically, we know that Nigerian budget had always performed below expectations, but it is apparent that 2018, being the last full year the Buhari government has got to convince Nigerians of the need to support the government for another term of four years, there is no doubting the fact that the 2018 budget will be implemented more seriously than previous years’. More so that global price of crude is favourable to achieving projected income. Across board, enhanced liquidity is being expected as projects will be executed en-masse.
Consequently, with an improved liquidity in the economy, relative to monetary policies of the Central Bank of Nigeria, the Nigerian stock market will ultimately become a net beneficiary.
POLITICS AND THE MARKET:
In the hay days of the market, it was a platform where politicians keep funds only to later withdraw to execute electioneering processes. The extent of such in the current Nigerian market can’t be ascertained to precision. Seeing also that introduction of TSA and BVN in the last three years had curbed free flow of funds generally and verified figures showing that Nigerian equities are mostly concentrated in the hands of foreign investors and local institutional investors, it is therefore not being expected that 2019 will pull funds away from the market for electioneering purposes as it used to be. How then in the 2019 elections inimical to the growth of the market?
Fear sure reigns in the minds of an average Nigerian and residents as well. Seeing that fear is a major enemy of investment, those who are non-indigenes with opportunities of moving their funds somewhere else will do so without a blink of an eye even if it comes at a loss. Portfolio reshuffling is also bound to be carried out even by institutions and high net-worth individuals who believe in Nigeria and the market. At that, a general lull current prevails at the market arena. From the situations of things, this seems sustainable.
Who takes the blames if not those in the game of power? The way and manner politics is being played in Nigeria and the occurrences of the last couple of weeks leading to the election of key officers in the party at the centre seems the advance tools with which elections 2019 are being gauged. There are palpable fears that all might not be well in 2019. About the only tactic against a negative unknown is an exit or a no adventure. In other words, funds within the next one year will exit the market more enter in, significantly too, funds that should come in would rather remain in other competing forms of investment that stocks. Bonds market will become vibrant, treasury bills and some other forms of fixed income investment most likely will receive boost at the detriment of the equities’ market.
Meanwhile, herdsmen and Boko-Haram attacks in various parts of the country have only been curtailed but not abated. A right thinking investor will bail out in such a high risk market.
WHAT ARE THE POSSIBILITIES:
- Stocks that could be held by institutional investors become the best option if purchases should be made at all. This is premised on the possibilities of a bail out of Nigerian stocks by foreign institutional investors. The only way out that would be left for the market will be local institutional investors. target stocks that could be held by local institutional investors hence, even in a volatile market, Nestle irrespective of the high price still rises with Guaranty and Zenith commanding high volume. The way to start is the stocks in the Nigerian Stock Exchange’ premium board.
- It is simply a good time to sell off stocks without the capacity to withhold stress. Sell such and hold cash.
- How low can stocks come? Early decision will help. Never attempt to hold a stock you know has little capacity to recover in cases of decline. In other words, don’t stay with stocks that will come low in price and will remain so.
- When a stock begins to trend low, don’t be quick to jump in. It is always better to wait and see before action is taken.
- Between now and April 2019, there are Q2, Q3 and even many audited reports. Your ability to forecasting possibilities in each of these reports becomes not your hedge but edge. Please note, a down trending market has no regards for short term earnings. a market being pushed by fear has no time for earnings reports. Let the market show the way you should approach it. Moving faster than the market could be disastrous.
- Making use of technical analysis indicators, make a list of stocks selling at oversold level, watch them over time and make strategic move.
- Follow the direction of money. Money flow index should be handy for you at all times in a turbulent market.
STOCKS TO WATCH FOR THE WEEK:
- ACCESS BANK PLC: Currently trending down on the money flow. Another session or two of decline seems the turning point to bringing the stock to oversold level. If you are in it, stress less. As a premium index stock, a rebound is sure. At what price? Let the market trend, you just follow. Keep tab on it as it draws near its lowest of N10.45 for the year. What does the next quarter earnings hold for Access? Watch out!
- AFRICA PRUDENTIAL PLC: Should the stock price of Afriprud decline just once, it becomes a buy recommendation. It is not a premium board stock but shareholding distribution acts as its shock absorber. Current earnings relative to price and the drive for excellence and value are attributes that make the stock worth your consideration.
- DIAMOND BANK PLC: The bank’s 2017 audited reports is poor, its 2018 Q1 is somewhat manageable. The market has so far hammered appropriately. Closing Friday session with over thirty million units’ bids size is an indication of a strong Monday session. For the rest of the week? Bids and positive outing seems possibly sustainable.
- FBNH: The strength of the stock lies in the management’s efforts at repositioning. Of course, it remains a buy and hold recommended stock for the medium term. For this week, there is bound to be mixed performance.
- FIDELITY BANK PLC: Monday open most likely stands positive for the stock but holding on to the likely early gains might be tough. In all, two days of gains at the least is possible while one day might end flat with possible one or two days of decline. 2018 Q1 released earnings and Q2 possibilities make Fidelity watchable. Profit in the stock could be taken when sighted.
- FIRST ALUMINIUM: Monday stands strong at the open. Into the week, mixed performances most likely. Money flow is turning.
- OANDO PLC: Monday open stands to be good for Oando but straight gains for the entire week looks extremely slim. The market still awaits the forensic audit on the company. Going by antecedents, buyers should beware!
- GUARANTY: For two days last week, huge volumes and value were seen in the stock. Good brand and perception with favourable shareholding distribution all combine to make the stock a medium to long term hold. It remains one of such to be held as hedge against turbulence.
- UCAP: Indicators are showing possible mixed week with Monday starting strong. After one or two days of decline, it will be arriving at oversold level hence, buyable. The stock so far this year had performed below expectations.
- ZENITH: Remains the stock to hold for the medium and long term. In the short term, price will vacillate.
- OTHER STOCKS TO WATCH:
- DANGOTE FLOUR
- DANGOTE SUGAR
- HONEYWELL FLOUR.