Market Update for April 18, 2018

Volatility Continues, As NSE Struggles To Find Direction Ahead Of Q1 Earnings Reports

The equity market on Wednesday continued its volatility wave in a trading range to close marginally down, struggling to find direction since it refused to breakdown the recent support level of 40,000 mark as investors sentiment continue to look up and down in anticipation of better Q1 earnings reports.

The two Q1 results from Guaranty Trust Bank and United Capital submitted to the Nigerian Stock Exchange (NSE) came in flat, giving an insight into what would be the direction of their share prices as the market opens this morning. 

The NSE index started the session out with a slide gap up and continued in that direction up to the mid-morning, pulling back at midday when it slipped into red, got right to the breakdown point of the intraday low of 40,492.26 basis points. This was after touching highs of 40,861.04 at resistance and rolling over to reduce the losing momentum in the last trading minutes to close the day at 40,772.26 on a low volume traded. 

Stock prices at this point are waiting for a trigger that is expected to come from the first quarter scorecards, especially given that many of the equities listed on the NSE are currently selling at a discount with strong dividend yield. The evidence of strong earnings to support higher price movement in an environment of dwindling rates as we look to a better first quarter GDP growth in the first week of May. 

Despite moving closer to the 2019 general elections, investors should keep their eye on rates, a continued drop in money market interest rates from here could fasten the rebound of stock prices in the short-term. 

Market technicals at the midweek were positive and mixed as volume traded was low amidst a strong buying pressure, positive market breadth and improved sentiment with buying position of 76%, while selling volume was 24% on a volume index of 0.51 of the day’s total transaction.  Money flow index is looking up at 37.31 points, compared to previous day’s 32.79 points, this is an indication that funds are gradually entering the market again.  

Index and Market Cap

The NSE All Share Index shed a marginal 16.42 points to close at 40.772.26 basis points after opening at 40, 788.68bps, representing a 0.04% decline on a low volume that was lower than the previous day’s. Similarly, market capitalisation was slightly down by N5.93bn to close at N14.73tr from an opening value of N14.73tr, also representing 0.04% value loss  

The downturn recorded for the day resulted from profit booking in stocks like Seplat, NB, International Brewery, Lafarge Africa, Union Bank and UBA, impacting negatively on the NSE’s Year-to-Date returns, as it contracted at 6.61%. Market capitalisation gains for the period stood at N1.12tr, representing 8.22% above the year's opening value.

Bearish Sectoral Indices

Sector performance was bearish except for the NSE Banking and Insurance that were up as a result of price appreciation in ETI, Guaranty Trust Bank, FBNH and Custodian Allied Insurance, while NSE Industrial, Consumer and Oil/Gas closed down due to profit taking

Market breadth for the day remained positive as advancers outweighed decliners in the ratio of 24:18 to halt the up market. 

Market activities were down in volume and value by 85.6% and 60.4% respectively to 230.17m shares worth N4.32bn from the previous day’s 1.60bn units valued at N10.91bn.
Transaction volume was boosted by financial services and oil stocks like GTBank, Fidelity Bank, FBNH, Japaul Oil and FCMB which witnessed increased trading to top the activity chart.

The best performers at the end of day were Jaiz Bank and Oando, topping the advancers' table with gain of 10% and 9.7% respectively to close at N0.88 and N9.05 each. This was due to market forces and sentiments.  

On the flip side, UBN and Sovereign Trust Insurance were the worst performing, after losing 4.75% and 4.35% respectively to close at N6.00 and N0.22 on market forces.

Market Outlook

We expect the rebound on the strength of low valuation amidst ongoing volatility and portfolio realignments, despite profit taking ahead of Q1 scorecards and 2018 Q1 GDP data. Even so, value investors continue to position for the short and long-term on the strength of company fundamentals.

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 ongoing and Q1 results are expected in the market arena.

We advise investors to allow numbers guide their decisions while repositioning in any stock, 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. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the Chart  Summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.
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A big thank you to all participants and all that supported to make the Abuja stock market trading workshop a success. We are grateful and believe what you learnt will enhance your knowledge and transform your investing strategies for profitable returns.

Again, we thank you.

Ambrose Omordion
CRO|Investdata Consulting Ltd
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