Investors Take Position Ahead Of Month-end Window Dressing

Market Update for August 28, 2018

Nigeria’s equity market on Tuesday resisted a further downward pull on improved sentiment, reversing previous day’s decline as bargain hunters took advantage of the prevailing low prices to re-position ahead of month-end’s window dressing and trading account balance by fund managers. This was especially true of banking stocks that had experienced selloffs by smart money, which made their shares prices attractive, considering their fundamentals. Added to this is the fact that a few are expected to pay interim dividend, even as investors look forward to half year earnings reports by these banks to hit the market any moment from now.

As at close of trading on Tuesday, the market seems to have set a recovery momentum to build on, but with the dwindling economy and political risks arising from the 2019 poll, which had triggered cautious trading due to seven months of decline. Investors should still watch to confirm this rebound before gradually taking position, because the economy is still dragging, as revealed by the 2018Q2 GDP report published by the National Bureau of Statistics (NBS).
Back to NSE, the attractive low valuation of banking stocks in the market, plus the fact that they could finally earn some income from their huge sterile funds kept with the Central Bank of Nigeria (CBN) in form of Cash Reserve Requirement (CRR). This is because the CBN plans to extend the funds to operators in economic growth stimulating and job creating companies, particularly in sectors such as agriculture and manufacturing (READ MORE).
The attraction to banking stocks resulted in a breakaway gap to the upside in the morning, which consolidated for a few minutes and then another rally took the index to intraday highs of 35,516.20 basis points, from low of 35,309.90bps for the day by midday to afternoon to close positively on a high traded volume.

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Tuesday’s market technicals were positive and strong, with high positive sentiments, high volume traded and positive market breadth as confirmed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 100% and ‘sell’ volume at 0%. Volume index was 1.31of the day’s total transactions.
The momentum behind the day’s market performance was however weak, despite the huge improvement, as reflected in the money flow index at 40.95bps, up from previous day’s 31.95points, indicating that funds entered some stocks in the midst of the prevailing low market liquidity.

Index and Market Cap
The benchmark index notched 204.85bps, closing at 35,516.21 basis points, after opened at 35,311.36bps, representing a 0.57% growth, just as market capitalisation was up N72.64bn, closing at N12.97tr, from N12.88tr, representing a 0.57% value gain.
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Upturn was as a result of price appreciation in low, medium and high cap stocks that impacted positively on the NSE’s Year-to-Date return now at 7.09%. Market capitalization within the period dropped to N623.12 billion, or 4.69%.

Bull Sector Performance
Sectorial performance for the day was largely bullish, except for the NSE Insurance that closed down by 0.16%, while the NSE Banking and Oil/Gas indices topped the table with 1.67% and 0.67% respectively. Market breadth was positive as advancers outpaced decliners in the ratio of 33:16 to halt the previous days down market.

Volume and value witnessed an increase by 89.97% and 17234% respectively to 339.68m shares worth N5.5bn, from the previous day’s 178.81m units valued at N2.02bn.
Transactions for the day were boosted by trading in financial service, healthcare and conglomerates stocks that witnessed increased trading to top the activity chart, like: Consolidated Hallmark Insurance Stanbic IBTC, May/Baker, Transcorp and UBA.
Portland Paints and Jaizz Bank were the best stocks as they topped the advancers’ table, after gaining 9.72% and 9.62% respectively to close at N2.71 and N0.57, purely on market sentiments and low-price attraction. On the flip side, Ikeja Hotel and Law Union Insurance were the worst, losing 9.92% and 9.88% respectively to close at N2.27 and N0.73 on profit taking and market forces.



Market Outlook
We expect the market to remain volatile as bargain hunters take advantage of the low-price regime, despite the political activities.
Meanwhile, investors continue to interpret the recent Q2 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released so far as a basis for determining the market and economy’s direction going forward. More disappointing reports will drive the market further down, or inspire a reversal if the numbers beat expectation.
Investors should review their positions in line with investment goals, strength of the company numbers and act as events unfold 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 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 fundamental.



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Ambrose Omordion
CRO|Investdata Consulting Ltd
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https://investdata.com.ng/2018/08/investors-take-position-ahead-of-month-end-window-dressing/