OVERVIEW:
The Nigerian Stock market as measured by the All Share Index gained 11,368.57 points in the 2017 representing a 42.30% year to date appreciation to close the year at 38,243.19 while market capitalization grew by 47.17% valued at N13.609 trillion as at December 28th, 2017 compared to the closing Market capitalization value of N9.247 trillion in December 31st, 2016.
All major indices showed a positive appreciation in 2017 with sectors as the Banking, insurance, consumer goods, industrial goods and oil and Gas appreciated by 73.32%, 10.36%, 36.97%, 23.84% and 5.76% to close at 475.44, 139.37, 976.10, 1,975.59 and 330.69 points respectively.
Market breath analyses review positive sentiment as 56 equities
advanced with 23 stocks declined as compared to last year’s 26 advance and 55 declines.
The breath indicators shows relatively
positive behaviors 2.43x.
Having had 3 consecutive years of decline in the Nigerian Stock Exchange (2014, 2015 and 2016 by -13.86%, -17.36% and -6.17% respectively), the Nigerian stock market is ranked among the best performing stock exchanges in the world for the year 2017 with a whopping appreciation of 42.30% with market capitalization growth of 47.17% in 2017.
The appreciation in the broad index is largely driven by gains in sectors such as the banking which advanced by 73.32%, Consumer Goods by 36.97% and Industrial Goods by 23.84%. On the individual equities, Dangote Suger topped the gainers list with 227.33% followed by International Breweries by 194.59%, Fidelity Bank by 192.86%, Fidson by 189.06, Dangote Flour Plc by 183.88% among others while on the losers side, FO topped by -48.50%, UPL by -46.23%, MRS by -36.49%, Mobil by -30.25%, Julius Berger by -27.42% among others.
Looking at the ASI monthly trend analysis, the month of May was the best month as the index grew by 14.5% with the next two consecutive months of June and July following through with gains. 8 of the 12 months ended positive for the index
Fundamentals review:
The Nigerian economy started in a uncertain mood in 2017 with the economy in recession as the GDP figure in quarter 4 released by the Bureau of Statistics was at negative -1.73%, depleting foreign reserves, currency instability, low prices of crude-oil, rise in inflation among other factors were the taking points. Uncertainty filled the atmosphere as investor’s shy away from the Nigerian financial market (money and Capital).
The efforts of the Central Bank of Nigeria (CBN) began to yield positive result after the introduction of multiple exchange rate windows most especially the I & E window coupled with seriousness on the fiscal side spur growth and confidence for investors
Technical analysis:
After the index failed to reach key intermediate support
levels of 22,331 and formed a higher low in the month of March 2017 which a
bullish Doji candle pattern signaled a possible reversal in trend as there were
resistances to sell with early accumulation being seen by the investing
community.
The Month of April ended as a bullish indecision thereby triggered a
steep bullish rally to as high of 39,656.5 in the month December 2017 which is
a key intermediate resistance zone of 31,121.9 -38,248. The index is currently trading above SMA 100 while
Stochastic/RSI 14 month period is trading at 83/77
In the longer view, major resistance and support level
stands at 43,224 and 19,246.34 respectively. Using Fibonacci analysis of the
downtrend of 65,910 high and low of 19,246, the index is still trading within
the retracement zone (currently around 38.3% level) and would technically be
termed as a corrective trend (not a
reversal in trend) until a break out above or below the retracement key
levels of 61.8%, 50% and 38.2%
Outlook for 2018
With the economy out of recession and growing (GDP as at 3rd
Quarter 2017 at 1.40%), growth in foreign reverse to about $38 billion, Crude
oil trading slightly above $60 per barrel, favorable rating from international
rating agencies among other, the macroeconomic fundamental favors another
appreciation in the Nigerian Capital Market.
On the flipside, the Nigerian Market is considered still in
a neutral trend for the long term while on the Medium and Short term in a
bullish market as long as it trades above the SMA 100.
The Banking, consumer goods and industrial sectors are most
likely to continue in the bullish trend in 2018. With the December 2017 candle
formation (inverted hammer) in the broad index, we expect a short term decline
early in the year, this would reposition most valuable stocks for
re-accumulation and more barging interest would spur another strong bullish
rally to possibly breaching key resistance level of 43,224.
On the other hand, a below 30,000 level the index may see a
strong bearish movement toward 19,246
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