Mid-Week: Market optimism declines as price correction looms
Category: Investors NewsBeat
Market price volatility gained momentum amid increased speculative trading on the Nigerian bourse as market seesawed considerably, following the significant decline in the market optimism as reflected in the low bargain posture paraded so far in the week.
Mid-week analysis revealed low bargain trend while profiteering seems to be dictating market trend as sell pressure keeps market breadth in negative divergent trend. Meanwhile, the price correction seemed to have subtly set in as All Share Index lost uptrend momentum, retracing from overbought range as revealed by RSI- an indication of decline in market optimism as noted above.
The outlook further reveals growing speculative trading as short termist scrambled for profits while value investors maintained the risk aversion trading posture.
Notwithstanding, the market turnover sustained positive posture, though on a weak note while the impressive naira votes posture significantly influenced by bullish activities witnessed towards Dangote Cement Plc, the market leader by capitalisation.
In our opinion as revealed by extensive analysis, the 5% gain recorded by Dangote Cement before mid-week session in the face of weak optimism tilted the scale against actual market sentiments.
Meanwhile, profit taking tendency remained the domineering factor as market lost uptrend momentum in an overbought position while the unrelenting sell pressure as reflected in the battered market breadth buttressed this further.
At the end of the today’s session, technical analysis revealed weak market optimism as market witnessed low bargain activities across attractive sectors so far in the week while market turnover closed weak.
More so, increased profit taking tendency continued to hit penny stocks while value stocks, mainly in medium capitalisation category, experienced mild sell activities.
Market closed with WTD performance of 0.15% gain- weak performance and decline in market optimism was observed when compared with previous mid-week performance of 2.36% gain while YTD performance stands at 11.57% as against 12.28% recorded in the previous week.
The improved patronage witnessed towards blue chip stocks in Industrial Goods, ServicesConsumer Goods, and finance, sectorscontributed to the market outlook so far in the week.
The Stocks on the Hunters’ Radar
Investors’ Trading pattern and psychology:
The trading pattern suggests increased speculative tendency while the profile of top 10 stocks on the investors’ radar reveals moderate risk appetite as majority of the stocks are penny stocks while CONOIL, IBTC and NACHO are the only medium and high priced stocks that made top ten stocks on the investors’ radar.
Notwithstanding, we remained concerned as regards to the driver of these top penny stocks that dominated investors’ radar so far in the week.
Further analysis into their last financials revealed mixed outlook as subsequent outlines will shed more lights.
Snapshot comment on their recent results.
Fidelity Bank (Q1 2012 result) sustained impressive gross earnings performance with growing profitability outlook amid healthy profit margin. However, the bank's balance sheet closed weaker with feeble Net Assets growth in the face of 19% plunge in cash and bank balances. Also, the double digit dip in loans and advances is not encouraging while we advise the bank to grow its deposit posture as well.
Ikeja Hotel (Q3'2011 result) records unimpressive performance as both top-line and bottom-line record negative growth, indicating weak performance in the quarter.
The financial status of the company appeared worrisome with growing debt profile while the working capital sustained negative posture. Similarly, the bank balance of the company plunged by 99%, buttressing the poor financial posture as observed.
Conoil(Q3'2011 result) records strong profitability posture which has put the earnings per share at N4.46kobo with sustained impressive turnover trend, indicating active market penetration and market share.
The shareholders' fund remained healthy and robust with 20% growth (YoY) while the 34% growth in working capital shows healthy financial posture of the company, though the significant plunge in bank balances and significant growth in expenses signifies poor cost management while we advise the company to put this under control.
Airservice(Q1'2012 result) records mixed outlook with slight weakness in top-line while the company sustained impressive and robust bottom-line. the financial status of the company healthy with growing working capital and bank balances amid low short term borrowings.
Analysis of investors’ radar (gainers’ list) revealed increased speculative tendency due to improved bargain drive towards penny stocks while high and medium priced stocks sustained weak patroange.