Rebound Likely On NGSE, As Investors Position For Q2 Earnings Season

Market Update for Week Ended July 13 and Outlook for July 16-20

A deeper look into the performance of Nigeria’s stock market and the happenings in the socio-political environment, particularly the crisis of confidence remains the major driver of the prolonged downturn. This began with profit booking that dovetailed into sell-offs that dominated the markets as revealed by the recent price action in major asset classes, economic data, price movers and volume traded.
The two weeks of consecutive decline in the second half of the year, ahead of Q2 earnings reporting season was due to the political tension in the weeks leading to the July 14, 2018 Ekiti State governorship election. Add this to the insecurity in the middle-belt region, where herdsmen are sacking farmers with the government seemingly complacent and helpless.
With the Ekiti State governorship election over and Dr. Kayode Fayemi declared duly elected, that of neighbouring Osun State would follow in the coming month, amidst expectations that things will likely further become clearer in the coming months as political parties conduct their primaries to choose flag bearer ahead of the 2019 general election. This is expected to further give insight or direction as to where the stock market is headed, because the political and economic agenda of the parties will help to identify where the real change Nigerians are longing for will come from by 2019.
Even then, you could correctly predict the outcome. It is very different when it comes to predicting market reaction at this time that prices of equity are low. The expected Q2 earnings reports that are likely to kick off this new week will be mixed performance, reflecting the effects of the nation’s economic slowdown in the first two quarters of 2018. This we think will not make much difference to drive investors but give the true state of the companies listed on the exchange at the end of first half of 2018. For whatever reason, investors generally dislike most forms of uncertainty.
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 50% just like buying position, due to bargain hunters positioning ahead of the earnings and economic reports, considering the low valuation of stocks while some were selling at loss for safety.
However, despite the downturn recorded, the money flow index inched up to 42.87 points from the previous week’s 41.45 points, a sign that funds are still entering some stocks and the general market notwithstanding the weak liquidity level currently in the market. The NSE index for the period remained above its 100-Day Moving Average, while trading below its 50-DMA for the fourth week to resist decline last Friday.

Equity Indicators Last Week
For a second straight week of July, the benchmark NSE All-Share index suffered a decline, shedding 232.82basis points to close at 37,392.77 basis points, after opening at 37,625.59bps, representing a 0.62% decline on a low transaction volume, compared to the previous week’s. The volume index of total transactions for the period was 0.49. Similarly, market capitalisation for the week closed at N13.55tr from the opening value of N13.63tr, representing a 0.62% value loss as medium and high cap stocks depreciated in their stocks price.
During the period under review, medium and low cap stocks topped the advancers table as market players took advantage of low prices to reposition their portfolios, using the support and resistance levels in anticipation of Q2 earnings reports which is likely to be below market expectations.
Stock prices declining for the period despite the mixed performance recorded reflected on the NSEASI’s year to date returns, which dropped farther to 2.22% negative returns, just as market capitalisation remain in negative at N121.14bn, representing 0.46% below the year opening value.

Negative Market Breadth
The number of decliners for the week outnumbered advancers in the ratio of 21:55 to record a negative market breadth as hot money continued to exit the market ahead of the 2019 general elections and the accompanying uncertainties. Investors’ unassuaged 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 positive note recording a marginal gain of 0.07% on Monday. This was however short-lived as it returned to its old ways on Tuesday, declining by 0.67%, which was sustained on Wednesday and Thursday before Friday’s 0.45% rebound that reduced the loss momentum by the index for the period to 0.62% from previous week’s loss position of 1.71%.
Sectoral indices for the period were in red as the general market, except for the NSE Oil/Gas that closed green, with other indexes closing in the southward.
Market activities were mixed for the week as volume traded was down by 33.7% to 1.22bn shares, compared to previous week’s 1.84bn units while value was up by 4.46% to N17.33bn, from previous week’s N16.59bn.
The best performing stocks for the period were Custodian Investment Plc and C & I Leasing that topped the advancers table with 17.47% and 10.22% gains respectively, closing at N6.12 and N2.48 each as a result of expected interim dividend amidst their low price attraction. The worst performing equities were Tantalizer and Mutual Benefits Assurance, which lost 25% and 24.44%, closing at N0.27 and N0.34 respectively on profit taking and market forces.
The share price of Presco, Learn Africa, Capital Hotel and Initiative Plc were adjusted for cash dividend recommended by their directors.

Market Outlook
We expect a continuation of last Friday’s rebound if the expected second quarter earnings season that will kicks off this week beat expectations of the market and analysts, in the midst of events unfolding in the political environment and expected June inflation reports.
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.

Save The Date: Investdata Stock Market Training Workshop
On Saturday, July 28, 2018

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.

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.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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https://investdata.com.ng/2018/07/rebound-likely-on-ngse-as-investors-position-for-q2-earnings-season/