INVESTORS LOOK OUT FOR MORE ECONOMIC DATA, PROBE Q3 FINANCIALS FOR DIRECTION

MARKET UPDATE FOR WEEK ENDED OCTOBER 27 AND OUTLOOK FOR 30- NOV 3

The last full trading week of the Q3 earnings reporting season on the Nigeria Stock Exchange (NSE) ended Friday after gyrating seriously for most of the period to close lower in consolidation of previous week’s position, despite the torrent of nine-month financials of quoted companies released even as late as Sunday afternoon.

Companies on the NSE are required to submit their quarterly earnings reports to the investing community as part of their post-listing requirement and the deadline for the current season expires on Tuesday, October 31, 2017, after which those that are delinquent are flagged.

During the period, the influx of impressive earnings and surprises impacted positively on some stocks and the market, with over 45 listed companies making available their scorecards. The momentum was however slowed down by profit taking as selling pressure increased with cashing of capital gains by traders leaving the week with mixed performance. 

The earnings surprises from fast moving consumer goods and banking sector players supported the positive economic data and recovery which was propelled largely by the continued intervention of the Central Bank of Nigeria (CBN) in the foreign exchange segment of the Inter-bank market, bringing relative relief to manufacturers and even as the high interest environment boosted earnings of banks. It must be noted that Fitch ratings at the weekend warned that the high interest earnings on Treasury Bills and government bonds may not continue for too long, as the party may end soon. The report also expressed reservation about the non-performing loans of banks, following their exposure to the volatile upstream sector of the oil industry.

Last weekend also, the Nigeria’s equity indexes is billed for retention of the MSCI (Morgan Stanley  Capital Index) Frontier Index, a plus for the nation’s market as foreign funds and portfolio managers rebalance their positions to meet the index requirement, a situation likely to support price rally, going forward. Important also is the fact that the quarterly earnings continues to beat market expectation to confirm the improving economic and company fundamentals necessary to support recovery. This is expected to further boost confidence among foreign and domestic investors, as well as traders.

Market breadth for the period under review turned positive marginally on the back of impressive numbers presented by consumer goods manufacturers that strengthened the market’s momentum, despite closing lower on mixed sentiments and profit booking by traders. The week also closed on buying pressure that is supposed to influence activities in the new week positively as more companies releases their numbers in the twilight of the season. However, investors and traders should focus on stocks with strong earnings and are trending in the up direction on the quarterly and yearly timeframe, especially those Nigeria stocks in the MSCI Frontier Index.

The weekly volume index was 0.58, with buying position at 97% and 3% selling volume of the total transaction as traders to continue to trade earnings volatility season.

The All Share Index shed 125.05 points to close the week at 36,462.26 points, from an opening figure of 36,587.31 points, representing a 0.34% decline on a higher volume of transactions. The index touched intra-week high of 36,754.39 and low of 35,825.05 basis points. There was a resistant at 36,734.39 as demand for stocks increased as traders cashed out gains, while market capitalisation for the period closed higher at N12.62tr from the opening value of N12.58tr, arising from the listing of additional shares to those of Guinness Nigeria, following its just concluded right issue that achieved 120% subscription, leaving market indicator with 20% appreciation in value.

During the week, low and medium cap stocks dominated the advancers’ table for period as impressive financials from consumer goods impacted equity in the sector to record 52 weeks high on the strength of their strong fundamentals and technical patterns that attracted more buyers irrespective of profit taking.

The bear-run resulted from profit booking, as well as the wait-and-see attitude to deluge of corporate earnings, as fund managers and analyst digested the emerging numbers before jumping into the fray.  This impacted negatively on the NSE ASI’s year-to-date return to 35.68%, just as market capitalisation for the period increased to N3.39tr, representing a 36% gain from the year’s opening value. Market breadth was flat with advancers slightly outweighing decliners in the ratio of 33:32 on a high volume of trades. This is an indication that investors and traders are returning to the market on the back of improving number released to the market. 

Stock markets around the world were mixed over the week, as oil prices continued to oscillate, hitting $59 as projected by commodity traders expressing belief that end of the year heating period may push the price above $60 per barrel in Q1 2018.

Britain’s FTSE100 was lower for the period, while Germany‘s DAX, Japan’s Nikkei and US market indexes were up, even as U.S. market indexes moved  higher, driven by strong tech earnings and robust housing market data. And also the positive Q3 GDP growth of 3% above estimate of 2.5%.  In Europe, ECB took the first steps in ending its bond-buying programme by reducing purchases to Euro 30bn, from Euro 60bn monthly.  In Asia, Japanese Prime Minister Shinzo Abe was re-elected with a super majority that could pave the way for the so-called “third arrow” of the Abenomics policy to jumpstart the economy.   

Back home, the NSE’s benchmark Index closed on the first day negative after losing 0.48%, which was halted on the second day when it gained 0.33%, continuing at the midweek’s session with a 0.25% notch. The trend was however reversed on Thursday when the indicators closed negative with a loss of 0.29%, which continued on Friday, with the indicators shedding 0.15%, and inclosing south for the second consecutive week, after losing the week 0.34% down.
The NSE and sectoral indices closed lower for the week, except for the NSE AseM, NSE Banking, NSE Lotus and NSE Pension that closed higher.

The week’s activities, measured by aggregate volume and value, were up by 42% and 16.98% respectively as 1.38bn shares changed hands for N16.4bn, up from previous week’s 872.89m shares valued at N14.02billion.

Nascon topped the advancers’ table, gaining 22.62% to close at N15.94 per share on the back of surprise in its Q3 earnings released recently, followed by Dangote Flour Mills, its sister company, which climbed 19.42% up closing at N8.24 each on positive  market sentiments and impressive Q3 numbers.

The decliners’ table on the other hand was led by Forte Oil, which closed 14.24% lower at N38.29 on market forces while Cutix followed with 14.00% drop to close at N2.02 per share on profit booking by traders.

During the week also, more than 40 companies released their quarterly reports and their Earning Per Share are already computed in the Investdata price and earnings tracking.

Also NB and Total Nigeria announced their Q3 interim dividend of N1.00 and N3.00 respectively.

Market Outlook
This week, the market volatility as a result of the earnings reporting season will continue as positioning, profit taking in expectation of more earnings reports this week as the season comes to close on October 31, 2017, ahead of Q3 GDP figure amidst year-end sentiments.
As we move into the final days of the earnings season, more numbers would likely be released, but one thing that is clear in the current market situation is that smart investors are accumulating and enhancing their positions in selected stocks.

Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year trading activities, especially now that prices of stocks are looking down amidst improving economic and market fundamentals.
It is time to use your technical tools to take decision by knowing the support and resistant level to reposition or exit any position.

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CRO | Investdata Consulting Ltd
info@investdataonline.com
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