Investors Await Impact Of Positive Economic Indicators On Nigerian Bourse

Market Update for May 14, 2018

Trading for the third week of May started on the Nigerian Stock Exchange (NSE) on a negative note, reversing the gain recorded in the previous session as losing momentum heightened with corrective wave extending on a low traded volume, just as investors sentiment was further weakened.
The session opened on a little gap down which widened by the mid-morning as sell offs in medium and high cap stocks persisted till midday, extending to the afternoon on a weak mood that made intraday lower lows of 40,667.46 basis points, from a high of 41,029.79bps. It eventually finished at 40,677.61 to close the day.

The five-month downtrend of Nigeria’s equity market supports a reversal on the back of low valuations arising from healthier companies as shown in their 2017 full-year and Q1 outings. This is supported by the fact that the nation’s economy is still in recovery mode, helped also by rising crude oil prices and improving consumption level expected to trigger market recovery, while the biggest drawback that seems to be having the upper hand remains uncertainties surrounding the political environment ahead of the 2019 general elections which would not just go away.

As if this was not enough, the rising debt level in the continent as noted recently by the International Monetary Fund (IMF) may just be a factor that is investors, most of whom are foreign, are keeping it in view (READ FURTHER). As if to assuage such fears however, Nigeria’s Finance Minister, Mrs. Kemi Adeosun, on Monday assured that the decision by the Muhammadu Buhari administration to reduce the nation’s cost of servicing international borrowings is yielding fruits, with its debt servicing cost dropping to 13% from 18% (READ FURTHER). Recall that the administration, last year issued $2.5bn Eurobond to pay off maturing domestic bonds, as part of reducing the huge cost of debt servicing.
Mrs. Adeosun had also noted on her personal twitter handle that the administration spent a significant N1.5tr on capital projects. Investdata agrees with those who argue that the impact of such spending is yet to reflect on the economy with road and power infrastructure, which have direct bearing on the economy still a far cry.

We note that the monetary policy induced stimulus of the Central Bank of Nigeria (CBN) that has kept the economy running is in dire need of fiscal stimulus to quicken and sustain this recovery, while ushering real and stable growth/development.
Monday’s market technicals were negative, as sell offs continued among highly capitalized equities, in the midst of low volume high selling pressure and negative market breadth. Selling volume stood at 97% and buying pressure, 3% on a volume index of 0.57 of the day’s total transactions. This evidenced profit taking by smart money as reflected in the money flow index that is turning at 61.77 points from previous day’s 60.55 points, an indication that funds in the market are weakening.

Index and Market Cap

The composite All-Share Index (ASI) shed 344.70bps to settle at 40,677.91bps, after opening at 41,022.31bps, representing a 0.84% decline on a low volume that was marginally higher than previous day’s. Similarly, market capitalisation lost N124.87bn to close at N14.73tr from an opening value of N14.86tr, also representing 0.84% value loss that further deepened investors reddish portfolio.
The day’s downturn followed sell-offs in high cap stocks like Dangote Cement, Nestle, NB, Oando, ETI, FBNH, Zenith Bank, Access Bank and Flour Mills, which impacted negatively on the NSE’s Year-to-Date returns. It contracted to 6.32%; while market capitalisation gains for the period fell to N1.08tr, representing 8.06% above the year’s opening value.

Bearish Sector Performance

Sectorial performance for the day were bearish to close red, except for the NSE Oil/Gas that managed to close green limping 0.01% as a result of marginal gain recorded by Eterna.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 32:11 to halt Friday’s up market.
Market activities were mixed with volume traded up by 2.0% to 218.76m shares, as against previous day’s 214.58m, while transaction value fell by 47.3% to N2.29bn compared to Friday’s N4.23bn.
Transaction volume was boosted by financial services stocks like UBA, FCMB, Sovereign Trust Insurance, FBNH and Fidelity Bank which witnessed increased trading to top the activity chart.

The best performing stocks were Caverton and Sterling Bank, which topped the advancers’ table, gaining 5% and 3.8% respectively to close at N2.74 and N1.63 each. This was due to market sentiments and forces
On the flip side, C&I Leasing and First Aluminum were the worst performing, after shedding 9.4% and 8.9% respectively to close at N1.55 and N0.41 each on profit taking and market forces

Market Outlook
We expect mixed market as bargain hunters take advantage of low prices in the midst of volatility as investors reposition their portfolios, on the strength of stronger numbers with which most companies began the 2018 financial year. Added to this is the economic fundamentals that are daily becoming more robust, which the expected Q1 GDP and April inflation data would likely confirm as part of the positive impact of monetary stimulus, among other extraneous factors. The National Bureau of Statistics (NBS) is expected to publish the April Consumer Price Index before Tuesday’s market open, amidst hope that such expected improvement in inflation as in the past would have any meaningful impact on the NSE’s indicators.

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
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Tel: 08028164085, 08032055467
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