Nigeria’s Equity Index Breaks 40,000 Psychological Line Amidst Cautious Trading, Mounting Concerns

Market Update for May 24, 2018

Nigeria’s equity market again tumbled on Thursday with higher losing momentum resulting in six consecutive trading sessions of pullback amidst a heightened sell off. This was despite the array of healthier company fundamentals and positive economic data that indicates the economy is still on course in its recovery drive, not minding that the Q1 GDP data released last week showing slower growth momentum represents a awake up call on the nation’s economic managers and policy makers to rethink and improve implementation strategies to give the economy more push and thereby sustain real sector expansion and drive growth.
The new normal is the exit of emerging markets, Nigeria inclusive, by smart money in recent times, amidst the monetary policy balancing resulting in rising yield in the U.S, as well as factors like the unfolding political drama in South Africa, the Malaysian elections, Argentina’s emergency rate hikes and request for IMF assistance, as well as the ongoing meltdown of the Turkish Lira.

At home, there is the political risk ahead of Nigeria’s 2019 general elections, which is already being fore-shadowed by the recently held ward congresses of the ruling All Progressives Congress (APC). The real test of 2019 will be the July governorship poll in Ekiti State, South West Nigeria, to be followed by neighbouring Osun, later in the year, before the elections for the remaining 32 governors (except also: Edo and Anambra). Then also, elections will hold for members of the state and federal legislature, the President and his vice beginning in February 2019.
The persisting bearish trend on the Nigerian Stock Exchange (NSE) may be blamed on reduced participation of institutional investors and low numbers of retails participants, due to lack of knowledge that would enable them profitably play the stock market at this time.

Trading on Thursday began with the benchmark NSE All-Share Index moving sharply lower at the opening session, staying down into noon and after, hitting intraday lows of 39,723.85 basis points from a high of 40,150.55bps. Trading therefore closed below the 40,000 psychological line to confirm the full lower low bearish sentiment over the last four months.
The week’s bearish ride has therefore increased from 75% to 100% as revealed by investdata sentiment reports, which does not in any way signal the end of Nigeria’s equity market. It is a time to change and adopt new trading or investing strategies by those hoping to benefit from the bearish cycle by effectively combining technical and fundamental analysis for profitable trading. This, Investdata Buy & Sell Signal Setup offers. Just send YES or STOCKS to the phones numbers below.

Thursday’s market technicals remained negative and weak as bearish transition continued on low traded volume in the midst of negative market breadth, with selling pressure of 100%, on a volume index of 0.74 of the day’s total transactions. The sell pressure for the day reflected in the money flow index which stood at 25.45bps from previous day’s 32.13bps. This is an indication that funds are too weak to drive prices upward. At the same time, it is signaling exit of money from the market as the index continues to trade below its shortest moving average in a 4-wave decline.

Index and Market Cap
At the close of trading, the benchmark NSE index shed 426.70bps to close at 39,723.85bps, after opening at 40,150.55bps, representing a 1.06% decline on a low volume that was slightly lower than the previous day’s. Similarly, market capitalisation fell by N154.56bn to close at N14.39tr from an opening value of N14.54tr, also representing 1.06% value loss to remain in red.
The downturn was as a result of sell pressure in medium and high cap stocks like Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, UBA, FBNH, Flourmills, Dangote Flour, Dangote Sugar, Honeywell, Access Bank and Fidelity Bank. These impacted negatively on the NSE’s Year-to-Date returns, which dropped to 3.87%; while market capitalisation gain for the period weakened to N815.47bn, of 6.07% above the year’s opening value.

Bearish Sector Performance
The sectorial performance for the day was likewise bloody and the same direction as the general market, especially the NSE Consumer Goods and Banking indices which recorded 1.79% and 1.70% decline to lead the pack.
Market breadth was negative amidst the long list of decliners, resulting in a 35:8 advancers to decliners’ ratio.
Market activities were down in volume and value by 3.85% and 57.15% respectively to 256.43m shares worth N2bn, from the previous day’s 266.7m units valued at N4.67bn.
Transaction volume was boosted by financial services stocks like Sovereign Trust Insurance, Diamond Bank, Fidelity Bank, Zenith Bank and UBA, all of which witnessed increased trading to top the activity chart.
The best performing stocks for the day were MRS Oil and Ikeja Hotel, which topped the advancers’ table after gaining 10.10% and 4.91% respectively to close at N34.35 and N2.35 each. This was as a result of market forces and sentiment.
On the flip side, Diamond Bank and Fidelity Bank were the worst performing, losing 8.28% and 5.5% respectively to close at N1.44 and N2.06 each on bearish mood.

Market Outlook
We expect profit taking and volatility to continue as bearish sentiment linger. Equity prices have failed to react to any positive company, market and economic fundamentals and news as a result of cautious trading ahead of the nation general elections. NSE Index had recently breakdown the descending triangle chart pattern which supports the prevailing trend.
Investors should review their position in line with their investment goal and take action as events as it unfolds.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season were less earnings are released ahead of march full year earnings release and Q2 interim dividend payment are expected in the market arena very soon.

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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