NSE: Imminent Rebound, Amidst Portfolio Review, Low Stock Valuation

Nigeria’s equity market had another very volatile session on Monday to start the week lower on a high traded volume with mixed sentiments while it continued its side-way trending. The current market behavior is not unexpected, given that the Nigerian Stock Exchange (NSE) has gone through correction to the level of resisting further decline as we saw on Monday. This has given rise to hope for an imminent rebound.
Trading started off with extension of previous day’s pullback through the mid-morning until midday where the index tested the support level at 40,579.54 basis points before retracing up to touch intraday highs of 40,832.34bps. Thereafter, it snapped back in the last minutes to close the trading session at 40,763.93, while resisting further a slip, a situation which analysts believe is a point to the imminent rebound on the strength of the subsisting low valuations in the market.

The said imminent rebound that is also on the back of expectations of the Q1 GDP numbers from the National Bureau of Statistics (NBS) to reflect the impact of sustained intervention by the Central Bank of Nigeria (CBN) to power a return to growth trend.
It is noteworthy that the market is getting into the final days of the Q1 earnings season and more companies filing their reports by the day.
Meanwhile, after several instances of non-response to otherwise wonderful score-cards, investors and traders finally applauded the Q1 earnings report of Transnational Corporation of Nigeria (Transcorp) which was released on Monday. The applauds came in the form of the 8% notch in Transcorp’s share price for the day, even as it emerged one of the most actively traded stocks, accounting for 17.66m units (SEE REPORT).

Frontier Markets
With emerging markets across the globe continue to wax stronger on the back of the rising commodity prices, particularly oil and supported by improving macro-economic fundamentals, some of them are becoming worthy of investment considerations as alterative opportunities for growth and diversification. One important consideration remains the fact that most assets in these markets are grossly undervalued due to improving company fundamentals and transparency promoted by the exchanges.
Being a frontier market, Nigeria remains an investment destination for foreign and institutional investors as her economic fundamentals continue to look better on monetary stimulus and growth trajectory.

The political risk and mixed performance of companies that released their earnings to the market on Monday, while more are been expected, will determine the general direction of the market. As noted earlier, the Q1 earnings season is gradually coming to an end, even as passage of the 2018 budget by the National Assembly is still being eagerly awaited, while momentum is building at a fast pace for the 2019 general elections. Already, Ekiti and Osun governorship elections are scheduled to hold in succession in the coming months and would give a snippet into what 2019 holds in stock, even as the dominant foreign investors go for safe bets.

Market technicals at the end of Monday were positive and mixed as volume traded was high amidst a strong buying pressure and negative market breadth. The buying position was 73%, while selling volume was 27% on a volume index of 0.67 of the day’s total transaction. The day’s resistance was helped by the improved money flow as can be seen through the index that is looking up at 44.26 points, compared to previous day’s 43.84 points, this is an indication that funds are gradually entering the market.

Index and Market Cap
The NSE All Share Index shed a marginal 50.91points to close at 40.763.93 basis points after opening at 40,81489bps, representing a 0.12% decline on a high volume that was higher than the previous day’s. Similarly, market capitalisation went down by N18.41bn to close at N14.72tr from an opening value of N14.73tr, also representing 0.12% value loss

The downturn recorded for the day resulted from profit booking in Dangote Cement, Flourmills, Guaranty Trust Bank, Dangote Sugar and Lafarge Africa which impacted negatively on the NSE’s Year-to-Date returns, which contracted to 6.59%. Market capitalisation gains for the period stood at N1.11tr, representing 8.09% above the year’s opening value.

Bearish Sectoral Indices
Sector performance was bearish except for the NSE Consumer and Oil that were up due value gain in Forte Oil, Eterna and Nigerian Breweries, while NSE Industrial, Banking and Insurance closed south. This was due to profit booking in Guaranty Trust, Wema and Continental Reinsurance.

Market breadth for the day was negative as decliners s outnumbered advancers in the ratio of 24:19 to extend the market downtrend.
Market activities were up in volume and value by 118.8% and 156.7% respectively to 530.22m shares worth N7.77bn from the previous day’s 242.29 units valued at N3.03bn.
Transaction volume was boosted by financial services, consumer and conglomerates stocks like Law Union, Zenith Bank, FBNH, NB and Transcorp which witnessed increased trading to top the activity chart.

The best performers at the end of day were Learn Africa and Transcorp topping the advancers’ table with gain of 9.17% and 7.98% respectively to close at N1.31 and N1.76 each. This was due to impressive earnings and high dividend yield.
On the flip side, Continental Reinsurance and Unity Bank were the worst performing, after losing 5.145% and 4.72% respectively to close at N1.66 and N1.21 on market forces and profit taking

Market Outlook
We imminent rebound in the midst of profit taking will also be further confirmed by the aggregate of Q1 scorecards, depending on the continued support of such extraneous factors like upswing in oil price, among other global events now closely under watch. 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.
Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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Tel: 08028164085, 08032055467
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