Caution Still, As Earnings Season Peaks, Investors Look To Expected Economic Data



Market Update for Week Ended July 20 and Outlook for July 23-27
The continued selloff on the Nigerian Stock Exchange continued for the third successive week in this second half of 2018, reflecting the continued cautious trading even at the peak of the Q2 earnings season which is being fueled substantially by uncertainties surrounding the 2019 general elections.

The Q2 numbers released so far has been mixed with the figures released by the likes of Transnational Corporation of Nigeria, Ecobank Transnational Incorporated, Wema Bank and Unilever beating expectations. Others came below market estimates, as they were poor, even as they revealed the negative impact of the economic slowdown in the first half of 2018.
We believe investors had significantly priced the various earnings expectation into trading decisions made in the period, leading up to the earnings season. This may have accounted for the somewhat muted impact on market performance as capital outflows and reversed the high investment inflows in the late 2017 and early 2018 as a result of profit taking and correction.

Already, going by data by the National Bureau of Statistics (NBS), inflation has continued to decline more rapidly than expected, as it moved closer still to the single digit target. The NBSe is expected to publish its June inflation data on Monday, July 23, 2018, which may follow the same pattern as in the past 16 months. Based on this reality, we expect that the Central Bank of Nigeria (CBN), during its two-day Monetary Policy Committee (MPC) meeting, beginning on Monday, we expect that based on emerging realities, the benchmark Monetary Policy Rate (MPR) would be slashed by 100bps to 13.00% in this or next meeting and definitely during this third quarter.
We are quick to note however, that there are significant risks that the MPC committee members will not make any rate cuts given its concerns about inflationary pressures from fiscal and electioneering spending.

Back to the market, in the period under view, the NSE’s market sentiment, technical, fundamental and bottom line were mixed, with selling pressure at 76% while buying position stood at 24%, due to players reaction to recent earnings released so far to market and expected economic reports, considering the low valuation of stocks while some were selling at loss for safety.

However, the downturn recorded, reflected marginally on the money flow index slight down to 42.69 points from the previous week’s 42.87 points, a sign that funds are still leaving some stocks and the general market, notwithstanding the weak liquidity level currently. As a result, the NSE index for the period remained above its 100-Day Moving Average, while trading below its 50-DMA for the fifth week to resist decline last Friday.

Equity Indicators Last Week
For three straight weeks in July, the benchmark NSE All-Share index suffered a decline, shedding 789.33basis points to close at 36,603.44 basis points, after opening at 37,392.77bps, representing a 2.11% decline on a high transaction volume to breakdown another psychological line of 37,000 mark, compared to the previous week’s. The volume index of total transactions for the period was 0.72. Similarly, market capitalisation for the week closed at N13.26tr from the opening value of N13.55tr, representing a 2.11% value loss as all classes of stocks depreciated in their stocks price.

During the period under review, low cap stocks topped the advancers table as market players await Q2 numbers to reposition their portfolios, using the support and resistance levels.
The decline in stock prices for the period despite the seeming rebound on Friday reflected on the NSEASI’s year to date returns, which dropped farther to 4.29% negative returns, just as market capitalisation remain in negative at N321.56bn, representing 2.45% below the year opening value.
Negative Market Breadth

The number of decliners for the week surpassed advancers in the ratio of 59:16 to record a negative market breadth as hot money continued to exit the market ahead of the 2019 general elections and the accompanying uncertainties, despite MPC meeting kicking off today. Investors’ fears and the dwindling confidence level in the whole system continue to trigger cautious trading, making many investors sit on the fence.
The NSE Index started the week on a negative note which lasted till Thursday, before turning positive on Friday after notching 0.38% that reduced the loss momentum of the index for the period to 2.11% from previous week’s 0.62%.

Sectoral indices for the period were in red as the general market, except for the NSE Insurance that closed green at 0.08%, while other indexes were red.
Market activities were mixed for the week as volume traded was up by 36.99% to 1.67bn shares, compared to previous week’s 1.22bn units, while value dropped by 14.43% to N14.83bn, from previous week’s N17.33bn.
Linkage Assurance and Sovereign Trust Insurance were the best performing stocks that topped the advancers table with 9.72% and 8.70% gains respectively, closing at N0.79 and N0.25 each as a result of N0.05 dividend and low price. The worst performing equities were Union Diagnostic and Capital Oil, which lost 34.29% and 23.38%, closing at N0.23 and N0.23 respectively on impact of market forces.
During the week, eight companies presented their Q2 earnings reports to the market, while one released its Q1 and 2017 full year results.

Market Outlook
As we expect more mixed performance in this earnings season, where surprises will be few and more disappointing numbers that will be below expectations of the market and analysts, in the midst of events unfolding in the political environment and expectation of June inflation reports this morning as MPC two days meeting kicks off today.
Investors should review their position in line with their investment goals and take action as events unfolds in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value, especially during this season were more quarterly earnings are expected to hit the market, ahead of Q2 interim dividend paying equities in August due to the auditing process of their financials for half year.
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.

Investdata Stock Market Training Workshop
The Date: On Saturday, July 28, 2018, Venue Ostra Hall & Hotel Alausa Ikeja Opposite NNPC Gas Plant

Theme: Comprehensive Stock Trading & Investing Toolkit for Rest of 2018
Sub Topics
Review of 2018H1 Market & Economic Performance: How Fiscal Reforms and Stimulus Will Support the Market/Economy in 2018H2.
In this presentation, the speaker will discuss how historically the Fiscal and Monetary policies have influenced Nigeria’s stock market, the implications for the second half and it would drive equity prices higher as recovery continues, impact of the new NSE market Structure.

2018H2 Trading Checklist: How to Find Winning Stocks in Nigeria’s Volatile Equity Market
After the prolonged correction, volatility is here to stay for the rest of 2018. Is it time to start worrying about losses suffered so far, a flattening yield curve or time to relax due to the outstanding earnings season? Better yet, is there a way to harness increased volatility to your advantage? Our facilitator, a stock market expert will show you how to handle increased volatility in 2018. He’ll offer insights into forces impacting today’s market. He will share, using real-time examples, his ultimate checklist to finding winning stocks propelled by volatility. This simple strategy allows you to quickly evaluate stocks and to better time entry and exit points, while understanding market forces moving your portfolio.

How To Generate Consistent Superior Equity Returns and Income With Dividend Stocks
Here, the expert will discuss his approach to generating equity income by investing in undervalued dividend stocks, what he looks out for when trading dividend stocks at a discount to historical valuations on multiples of price to sales, earnings, cash flow, book value, and enterprise value to EBITDA. In addition, he requires companies to have positive operating cash flow over the past 12 months, with dividends covered comfortably by cash flow.

Powerful Patterns and Effective Strategies for Trading Shifts in Market Volatility
Recent and ongoing changes in market volatility present both risks and opportunities for discerning traders. Learn some of the most effective strategies for taking advantage of the high-probability trading opportunities available in equities, while minimizing risks associated with stock market trading. The six most powerful patterns in the market to trade, how to know which patterns and strategies to specialize in for consistent results and the critical difference between oscillating and momentum patterns.

Also, you will learn How the new pension funding structure will boost your retirement savings and the stock market. How online trading through your phone and laptop will help maximized profit.
Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
https://investdata.com.ng/2018/07/caution-still-as-earnings-season-peaks-investors-look-to-expected-economic-data/#more

Comments

Popular posts from this blog

Wherever You are NOW is Your Decision