Market Update for Week Ended April 6 and Outlook for April 9-13

NSE Indexes Remain Red, As Investors Expect Rebound On Low Valuation

Equity trading for the week ended April 6, 2018 on the floor of the Nigeria Stock Exchange NSE) closed lower again, disappointing investors and traders who had expectedly felt it was the right time for the market to react to the inflow of robust earnings reports after weeks of standing aloof. This expectation was based on the increased number of companies that have released impressive scorecards before and after the two-day maiden meeting of the Monetary Policy Committee (MPC) for the year.

The meeting, at least, reduced the level of uncertainty and gave direction by leaving rates unchanged in line with analysts’ expectations, at a time of rate cuts by African central banks in the recent times. The decision to hold rates by the CBN may be linked to the nation’s sociopolitical uncertainties around the coming the 2019 general elections when there is expected to be huge political spending and the need for care so as not to unsettle the ongoing economic recovery, especially as it is still fragile, despite the continued positive economic data being released by National Bureau of Statistics (NBS) and CBN.

The declining rates in the money market and lower yields environment are likely to support more flow into the equities market as average dividend yields are looking up in the short-term for fund managers to play around. This is especially as the just concluded earnings season has revealed greater inherent values in the companies ahead of their 2018 Q1 corporate numbers expected in the market any moment from now.

Meanwhile, the NSE’s All-Share index continued to experience pull back as it broke another strong support level of 41,000 on a strong mixed sentiment at 40,841.14 basis points, on a lower traded volume and short trading period. This was after it touched the week’s high of 41,615.41 basis points from low of 40,512.37bp. This down market may not last, if the improving investors’ sentiment after the MPC had given direction, ahead of the March inflation data by the NBS slated for publication on April 16, 2018. This continues to be supported by factors like stable oil prices, increasing number of tax payers, rising current account surplus external reserves.     

The mixed performance witnessed around developed markets of the world over the period were due to fears arising from potential trade war between the world’s largest economies, following which major U.S and Chinese market indexes closed red over the period amid rising trade tension with imposing of tariffs to restrict imports from each other. If this is not checked quickly, it may have a spillover effect on global economic growth forecast, besides weakening the momentum in an already struggling global equities market.

Back home, market technicals for the week was weak and mixed, with the low traded volume on negative market breadth and strong selling pressure of 70%. Buying volume was at 30% of the week’s total transaction, continuing the bear run, as the market continues trading below its 100-Daily Moving Average and weak inflow of funds. This is revealed by the money flow index that continues to point downward at 46.16bps.

Benchmark index for the period shed 663.37bps to close at 40,841.14bps, after opening at 41,504.51, representing a 1.60% decline on a relatively low volume, which was lower than previous week’s. Similarly, market capitalisation slipped by N239.6bn to close at N14.75tr from its opening value of N14.9tr, representing 1.60% value depreciation.  

The bearish performance of the market during the period was attributed to sustained sell-off and profit booking on high cap stocks that suffered losses after their share prices were adjusted for dividend declared. Consequently, the market has become attractive, when the strong earnings powers of listed companies is considered. Selling positions were with particular attention on Dangote Cement, Zenith Bank, Guaranty Trust Bank, GSK, International Brewery and Dangote Flour among others.

The NSE’s year-to-date returns therefore reduce to 6.79%, even as market capitalisation growth for the period stood at N1. 16tr, representing a 8.40% gain from the year’s opening value.

During the week, low and medium cap stocks were dominant on the advancers table, particularly those with high Dividend payouts and low price attractions.  Transactions were driven by activities in the financial services, conglomerates and consumer goods sectors, even as market breadth was negative with decliners outnumbering advancers in the ratio of 53:19 on a low volume of trades.

NSE index opened the week on a bearish note, a trend that was sustained till midweek, only to reverse on Thursday when it notched 0.31%. This could however not be sustained on the last trading of the week as it pulled back again by 0.31%, bringing the week’s total loss to 1.60% as the market seemingly ignored the rush of impressive numbers.  

Sector indexes for the week experienced a bloodbath as they all closed in the red to close the week red.

Market activities in volume and value were down by 4.51% and 21.11% to 2.33bn shares worth N28.93bn from the previous week’s 2.44bn units valued at N36.67bn.

The best performing stocks for the period were Lasaco and May& Baker, which topped the advancers table with   21.21% and 14.29% gains respectively to close at N0.40 and N3.20 per share, on the back of their high Dividend Yields and expected Q1 earnings results. The worst performing were Japaul Oil and Unity Bank that lost 23.73% and 17.213% to close at N0.45 and N1.01 respectively, due to profit taking and impact of market forces.

During the week, the share price of Zenith Bank was adjusted for the N2.45 final dividend recommended by its directors.