Another Volatile Session As Investors Await Budget Passage, Inflation Data

Trading on the Nigerian Stock Exchange (NSE) again had another very volatile session to start the week Monday on a flat note, as the day opened on a little gap up with many stocks surging in few minutes to kick off the session. This lasted till mid-morning reaching intraday highs of 41,233.42 basis points before succumbing at midday to profit taking, hitting lows of 41,031.15bps. It however made recovery moves in the last trading minutes of the day, closing marginally up.
The market on a daily time frame have been trading above its 20 day moving average for six days so far as the current seeming wave 3 gets extended.

The increased buying pressure of 100% as revealed by market technicals in the midst of positive market breadth and low traded volume indicates that investors are still studying and analyzing the Q1 earnings reports and economic data. Moreover, this is happening at a time oil price is set to hit $100 at the international market, after crossing the $70 mark on the strength of new sanctions placed on Iran.
Followers of Investdata will recall that in our review of 2017 and outlook for 2018, we mentioned that oil will trade above $70 (READ). This has already happened, helping to boost Nigeria’s economic fundamentals amidst hope that the National Assembly will stay true to its promise to pass the 2018 Appropriation Bill into law this week as announced by Senate President Bukola Saraki on Monday. Recall also that the budget has a benchmark of $45 per barrel.

Also noteworthy is the recent signing of a $2.5bn currency swap agreement between the Central Bank of Nigeria (CBN) with its counterpart- the People’s Bank of China (PBoC), which is another unconventional monetary policy tool to propel economic growth. As has been explained (READ), this strategic move is of great benefit to the Nigerian economy in the following ways: It will boost returns on investment for importers as currency transaction cost would drop, just as there would be less pressure on the Naira, among others.

The demand for stocks on Monday were 100%, while selling volume was 0% on a volume index of 0.55 of the day’s total transaction. The bull transition was extended despite profit booking in high cap stocks that reflected in the day’s money flow index, which was slightly weakened at 49.11 points. Compared to last Friday 49.36 points, this is an indication that funds level in the market is still weak.

Index and Market Cap
All Share Index for Monday’s session gained a marginal 14.70 basis points to close at 41,233.42bps after opening at 41,218.72bps, representing a 0.04% growth on a low volume that was lower than the previous day’s. While market capitalisation was down by N16.3bn to close at N14.92tr from an opening value of N14.93tr, also representing a 0.11% drop in investors’ position, as the share price of Nestle, Berger Paints, Pharma Deko and Consolidated Hallmark Insurance were adjusted for dividend recommended by their directors.

The upturn was driven by value gain in stocks like: Dangote Cement, Guinness, 11 Plc, Oando, Eterna and C/I Leasing that impacted positively on the NSE’s Year-To-Date returns, lifting to 7.8%; while market capitalisation gains for the period stood at N1.3tr, representing 9.59% above the year’s opening value.

Bullish Sector Performance
The sectorial performance was largely bullish except for the NSE Banking and Consumer goods that closed red due to losses suffered by Guaranty Trust Bank, Zenith Bank, FBNH, Nestle, NB and Honeywell. Other sectors that were in green like the general market are NSE Industrial, Insurance and Oil/Gas.

Market breadth was positive as advancers outweigh decliners in the ratio of 21:18 to continue the seeming two-day bull transition.
Market activities were down in volume and value by 21.9% and 39.3% respectively to 221. 4m shares worth N2.57bn from previous day’s 283.63m units valued at N423bn.

Transaction volume was boosted by financial services stocks like Lasaco, Guaranty Trust Bank, Sovereign Trust Insurance, Mutual Benefits and Sterling Bank, which witnessed increased trading to top the activity chart.
The best performing stocks for the day were Eterna and C/I Leasing that topped the advancers’ table with gain of 9.76% and 5% respectively to close at N6.30 and N1.89 each. This was due to market sentiment and expected dividend.
On the flip side, Unity Bank and UACN Property which shed 5% and 4.87% respectively to close at N1.14 and N2.34 purely on profit taking and market forces.

Market Outlook
We expect a positive performance on continued volatility and profit taking as investors reshuffle their portfolios along the line of companies with stronger numbers as shown in their economic fundamentals and ahead of Q1 GDP and April inflation data.
These are likely to confirm the positive impact of monetary stimulus and extraneous factors like upswing in oil price, among other global events now closely under watch.

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.

Ambrose Omordion
CRO| Investdata Consulting Ltd
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