Amidst Earnings Inflow, Investors Expect Surprises, Juicier Dividends To Reduce Selloffs

Market Update for Week Ended February 16 and Outlook for Feb 19-23

The Nigerian Stock market last week moved lower to continue the correction wave and panic selloffs that hit the market on January 26, which was an extension of the pullback in the global markets of 10.2% within a space of two weeks. This triggered concerns among emerging and frontier markets investors, besides revealing that global market and economic performance are becoming a function of crude oil price movements, thereby changing and influencing the real fundamentals and factors for, or against the market.

The mixed performance witnessed within the period under review followed recovery by stocks from the recent market declines as the earnings reporting season kicks off with early filers like Nigerian Breweries reporting a 21% increase in dividend payout. This may be giving, perhaps, insights into what investors should expect from consumer goods stocks that have established up trending earnings before now, as more early filers release their full year numbers this week.

Another positive economic indicator that hit the market last week was the Consumer Price Index that maintained a downtrend as the National Bureau of Statistics (NBS) reported that January inflation rate slowed down to 15.13% from 15.37% in December to further confirm the nation’s recovery that had reflected in other positive economic data.

The All-Share Index resisted moves to breakdown its 42,000 psychological line, which is becoming a new strong support level, such that any breakout could have dragged it to 41,000 basis points. But as the 2017 dividend declaration season kicked off with the early filer, expect the prices of dividend paying stocks to reverse up as revealed already by the NSE Pension index which closed higher for the period.
The market technicals were weak but mixed last week as traded volume was lower amidst negative breadth to continue the previous week’s down market.

The NSE’s composite index shed all of 489.09 points to close at 42,638.83 points, from an opening figure of 43,127.92points, representing a 1.13% decline on a low volume, which was lower than previous week’s. Similarly, market capitalisation closed lower at N15.3tr from its opening value of N15.45tr, representing a 1.13% value loss by investors.
It was mixed sentiments with the market’s loss momentum subsiding on the strength of increasing buying positions, one factor that has slowed down profit booking by traders and investors. The NSE ASI’s year-to-date returns dropped to 11.49%, even as market capitalisation growth for the period stood at N1.7tr representing a 12.43% gain from the year’s opening value.

During the period, medium and high cap stocks dominated the best performing stocks’ table, especially those that are dividend paying with possibility of growing their payout as market expect their full year numbers any moment from now.
The current pullback has impacted their yield as decline in prices makes the stocks attractive for traders and income investors.
Transactions were driven by activities in the financial services and conglomerate sectors.
Market breadth for the week was negative with decliners outnumbering advancers in the ratio of 48:30 on a lower volume of trades to continue two week bearish run.

International markets over the past week closed higher as U.S indices sharply moved higher, despite concerns over economic indicators like the census Bureau report that show 0.3% drop in January retail sales, along with a sharp downward revision in the December figure. The consumer price index also rose an unexpected 0.5% month-on-month and 2.1% year-on-year, which sparked concerns that Fed could hike rates sooner than previously envisaged. In Europe, industrial production rose more than expected in December, helping to power the fastest economic growth rate in a decade. In Asia, investors have been expressing increasing concerns over growing corporate and household debt levels that could derail the region’s growth, if not addressed early.

Back home, the NSE All-Share Index opened the week 0.90% down, moving further south on the second day when it fell 2.41%, a situation that was however short-lived when the index recovered 1.11% at the end of midweek’s trading. This was sustained in the final two trading sessions of the week, when the index gained 1.03% and 0.08% on Thursday and Friday respectively; bring the week’s total loss to 1.13%.
The composite index and all sectoral indices closed lower for the period, except for the NSE Pension that was flat at 0.08%, while the NSE AseM remained unchanged for the week.

Market activities were mixed as volume was down by 33.48% to 2.94bn shares from the previous week’s 4.43bn units, while value climbed by 15.1% to N27.96bn from N24.24bn.
Berger Paints and Beta Glass topped the advancers’ table with a 15% and 10.16% gain respectively to close at N10.35 and N72.10 per share, due to market forces and their possibility of juicier dividend payments; while Consolidated Hallmark Insurance and First Aluminum led the decliners table, losing 22.86% and 19.57% to close at N0.27 and N0.37 respectively, on the back of market forces and impact of the new pricing rules.

Market Outlook
As more early filers hit the market this week with their numbers, expect volatility and repositioning to continue, while profit taking will reduce on the strength of expected payout and earnings surprises.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is approaching.

We advise investors to allow numbers guide their decisions while repositioning for the rest of the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
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