Sunday, June 05, 2016 8.38 PM / Taiwo Ologbon-Ori
Nigerian stocks continued a recovery pattern; after a moderate weight loss observed in the month of April, to close the month of May bullish by gaining above 2,600.00points to comfortably settle above 27,000.00 bpts after peaking at 28,902.25 (7months-High).
Technically, market is now in a bullish zone, trading above its 50DMA, 100DMA and 200DMA. Also, the analysis revealed a significant divergence between market sentiments and the bearish postures of macroeconomic fundamentals.
We observed that investors maintained optimistic postures towards investment in equities despite unfavourable figures from macroeconomic indicators i.e. inflation hitting new high above 13% while annual GDP growth slipped to new low within negative zone, showing strong possibility that Nigerian economy is heading towards recession.
We further observed that investors remained bullish week-on-week in the last recent 17sessions as market capitalisation had appreciated by N516.37billion to hit above N9trillion despite Nationwide Labour strike, 68% hike in PMS and removal of petrol-subsidy, tight-liquidity outlook amid growing cost of living across nation and laying-off of staff/workers across key sectors.
On this note, we are of the opinion that the change in fiscal policy towards market economy could not be isolated from this sustained optimism and bullish pattern on the Nigerian bourse i.e. the partial deregulation of downstream sector, introduction of flexible FX policy and trust surplus for the president as implementation of budget 2016 took-off.
The month of May remains the best performing so far in the year to post 10.41% gain, which came in line with our position as we anticipated a bullish outlook in Q2'16 in our previous report. Though, not without degree of uncertainty as modalities on flexibility of FX policy is yet to be released- this in our opinion would continue to put foreign investors on hold and weaken FDI momentum as uncertainties around devaluation of Naira remains high.
Furthermore, extensive analysis revealed stocks that are on hunters’ radar as market sentiments defied battered macroeconomic fundamentals in the recent month. The subsequent paragraphs would put this in proper perspective as we highlight the set of stocks that have been moving market northwards in the last 16 to 17 trading sessions.
In addition, Price analysis revealed penny stocks leading the performance table within the periods under review while the big capped stock are on the bottom-side of the same table. This had technically revealed growing risk appetite from investors as profile of top six gainers had suggested.