Market Update 22 | Independent Newspapers Limited
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Market Update 22

Posted: Jul 27, 2015 at 12:00 am   /   by   /   comments (0)

Weaker Earnings Further Depresses Market Indices

The blood bath in the market continued last week with the composite Nigerian Stock Exchange All Share Index (NSEASI) extending its free fall as equity prices closed the week flat on negative sentiments lingering across the market.

The further decline in market indices after the long holiday was caused by the unimpressive earnings reports released during the trading sessions of the week  that were below market and analysts’ expectations. The changing global monetary policy in one way or the other has started influencing capital flow and output.

U.S. markets were down as a result of investors’ reactions to weak housing numbers that were released, regardless of strong earnings that hit the market. In the same vain, European stocks nose-dive as traders dumped mining stocks due to the fall in commodity prices in global market.

In Nigeria, the market’s momentum   for the week was bearish, despite the gain recorded on the first trading session of the week as investors’ sentiments diminished on the weak earnings and expectations from the Monetary Policy Commission (MPC) meeting on Friday.

The number of decliners for the week out paced the advancers as the Composite index NSE ASI closed slightly up at 31,091.69 points from an opening figure of 31,047.99 with difference of 43.70 points in just four trading days, representing 0.14 per cent positive returns. However, this brings the negative Year -to -Date performance to 10.1 per cent.


On July 25, 2015, NSEASI closed above the lower band by 14.1 per cent. Bollinger Bands are 16.49 per cent narrower than normal.  The current width of the bands does not suggest anything conclusive about the future volatility or movement of prices. During the past 10 bars, there have been two white candles and eight black candles for a net of six black candles.  During the past 50 bars, there have been 15 white candles and 35 black candles for a net of 20 black candles. Currently the MACD is bearish since it is trading below its signal line. The MACD crossed below its signal line 58 period(s) ago.  Since the MACD crossed its moving average, NSEASI’s price has decreased 9.96 per cent and has ranged from a high of 34,956.961 to a low of 30,483.449. The current value of the RSI and Stochastic Oscillator 23.89 and 58.77 respectively.

As the market continues to trade below it’s short to long-term moving average with relative low volume on the last trading day. This does not suggest that the bear is losing power, going by the positive close of the market. The blue, green and red line represents 200, 50 and 20 moving averages respectively. This suggest that positioning in stocks with strong fundamentals regardless of the bear market is now.

The market breadth for the week was negative, despite the marginal gain recorded. The NSE ASI traded within 31,000 psychological points in the four trading days, closing at 31,091.69 amidst massive sell offs. The market capitalisation recorded about N200 million increase within the four days to close at N10.61 trillion from N10.60 trillion it opened this week. Sector indices closed in different directions as NSEOILGAS led the sectoral gainers with 1.55 per cent while NSEINS closed as the highest loser by sector with 2 per cent.

Activities level in terms of volume and value of trades improved by 46 per cent and 15 per cent respectively, relative to previous week’s closing levels. In the week under review, total of 1.73 billion shares valued at N23.39 billion were exchanged in a higher number of deals of 14,673 compared to 1.18 billion shares valued at N20.25 billion exchanged in 14,001 deals recorded in the previous trading week.

Market Outlook

Unimpressive earnings sentiments that triggered the early profit taking after the market had recorded gains for two trading sessions last week may continue to push down the market this week if numbers emanating from companies remain weak and below market expectation.

As MPC kept all its rates unchanged after Friday’s meeting, we expect a mixed performance as fund managers takes end of the month to reposition their portfolios.