Bears Sustain Grip On Nigerian Equities Amidst Wait For Unusually Positive News

Market Update for May 21, 2018

Nigeria’s equity market on Monday had a mixed and weak session to remain in its volatile mood on three trading days of back-to-back losses as it heads for the recent 40,206.10 basis points strong support level. This has become the red line, because any breakdown of the at that point will confirm a full-blown bear market, irrespective of all the positive factors that ought to make the market blossom.
These include good 2017 full-year and Q1 company earnings reports and economic data like inflation that continues southward. Only on Monday, the National Bureau of Statistics (NBS) released the Q1 GDP data showing that the nation’s economy recorded robust, even if less than anticipated growth (READ) all of which should have influenced the market positively and boost investor and public confidence. One factor that has been blamed for this by various analysts and which Investdata Research aligns with is the political risk surrounding Nigeria’s 2019 general elections, as well as the unfolding globally events that are also militating against emerging markets which may also pale into insignificance over time. The market may therefore be awaiting some unusually positive news that would remove the thick cloud of political risk hovering around the market and change it to the northward direction.

Monday’s trading started with a little gap up, as most low cap stocks recorded some gains before the mid-morning pullback to get the NSE Index below its opening level sharply by the midday. It however bounced back by the afternoon session after touching intraday lows of 40,383.19 from highs of 40,476.61basis points to finally close the day at 40,472.45 on a low traded volume.
The low volume traded reflected the wait-and-see attitude of investors for the outcome of Tuesday’s release of the communique of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting.
At the risk of repeating ourselves, Investdata believes there is need to revisit the Federal Government’s economic diversification strategies and policies even as the delay in budget passage, disbursement and implementation style have not help matters, because the fiscal stimulus to drive nor oil sector are very weak.
Market technicals were negative and mixed as volume traded was low in the midst of positive market breadth, with mixed sentiment of selling pressure at 55%, while buying volume was 45% on a volume index of 0.76 of the day’s total transactions. Profit taking for the day reflected in the money flow index which stood at 38.29bps from previous day’s 47.02bps. This is an indication that funds are weak and insufficient to drive prices, while at the same time signaling exit of smart money from the market.

Index and Market Cap
The composite NSE All-Share index had a negative extension from the previous day to shed a marginal 47.38bps, closing at 40,425.07bps, after opening at 40,472.45bps, representing a 0.12% decline on a low volume that was lower than the previous day’s. Similarly, market capitalisation slipped N17.16bn lower to close at N14.64tr, from an opening value of N14.66tr, also representing 0.12% value loss that further put investors into red position.
Monday’s downturn was attributable to profit taking in medium and high cap stocks like Guaranty Trust Bank, Access Bank, UBA, FBN Holdings, Stanbic IBTC, Flourmills, Oando, Dangote Flour, Custodian and NEM Insurance. These impacted negatively on the NSE’s Year-to-Date returns, which dropped to 571%; while market capitalisation gain for the period waned to N1.03tr, of 7.60% above the year’s opening value.

Bullish Sector Performance
The sectorial performance for the day were largely bullish, except for NSE Banking and Insurance that closed down as a result of sell-offs in most banking and insurance stocks already highlighted, while AIICO was adjusted for dividend declared, Other indexes were up due to gains recorded by Forte Oil, Lafarge Africa, NB, Dangote Sugar and Unilever.
Market breadth was positive as advancers outnumbered decliners in the ratio of 26:22 to continue the three-day down market
Market activities were down in volume and value by 22.61% and 54.62% respectively to 271.27m shares worth N2.3bn from the previous day’s 350.55m units valued at N5.08bn. Transaction volume was boosted by financial services stocks like Africa Alliance Insurance, Fidelity Bank, Diamond Bank, GTBank and Access Bank which witnessed increased trading to top the activity chart.
Unity Bank and Consolidated Hallmark Insurance were the best performing stocks for the day, as they topped the advancers’ table, gaining 8.5% and 7.4% respectively to close at N1.02 and N0.29 each. This was as a result of market forces.
On the flip side, NEM Insurance and Custodian were the worst performing, losing 4.9% and 4.8% respectively to close at N2.52 and N5.00 each purely on profit taking.

Market Outlook
We expect the outcome of the MPC meeting to either sustain, or reverse the profit taking trend after the Q1 GDP released came below expectations. Equity prices failed to react to the positive company, market and economic fundamentals and news. The NSE index recent formation of descending triangle chart pattern supports continuation of the prevailing trend.
Investors should not panic out of their position, instead watch events as they unfold. Instead, stay in equities with intrinsic value, especially at this time when dividend is drying out, just as the last of the Q1 results have hit 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.

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