NGSE Index Falls Slower, As Investors Rebalance Portfolios On Q3 Financials

Market Update for September 19, 2018

The nation’s equity market had a mixed session at the midweek to close marginally lower, on a positive sentiment, despite the seeming profit booking in insurance stocks that had recently rallied as a result of the expected merger and acquisition ahead of the recapitalization in the sector.
The Nigerian Stock Exchange (NSE) Index at the opening of the session slipped downward slowly until mid-morning and into the midday, before consolidating by afternoon after touching intraday lows of 32,269.75 basis points from the highs of 32,392.93bps. It thereafter closed the session at 32,375.12bps on a low traded volume.

The mixed corporate earnings and low equity prices are factors attracting bargain hunters to the market despite the economic slowdown, and ahead of the Q3 earnings season. Traders always take advantage of price disconnection from fundamentals, especially when it’s driven by fear or confidence. The prevailing situation in our market today is traceable to the twin effects of political fear and the ensuing dwindling economic activities. These fears: political and other worries have been priced into the stocks making them highly undervalued, especially the blue-chips. There are hopes that the strong and growing fundamentals of these companies will support their prices before and after the 2019 general elections, all things being equal.
Gradually, we are seeing a convergence in MACD that may support short rally in this downturn. The performance gap between the composite index and technical indicators are now close to rebound points since it looks like the index is resisting further decline.
On Wednesday, we mentioned emerging market economics benefiting from forced trade reform in China and others.

In short, all of the countries that have been short-changed on their global trade competitiveness because of China’s weak currency policies, should benefit in a world where China is held to a standard of fair trade. Emerging stock markets are expected to witness big move with the idea that these countries may get a better crack at global demand, I suspect these stock markets could be in for a big rebound.
Back home, despite the prevailing market situation, many company fundamentals remain intact and attractive, but identifying when to buy is however what matters now which technical analysis will do for you. The market is preparing to produce another set of billionaires in 2019 and beyond, that is why you should go for Investdata Consulting’s July 28, 2018 Stock Trading Workshop HOME STUDY PACK. These are audio-visual materials you can play to view the live class on your phone and laptop to help you know when to jump into the market and specific stocks, or stay out. For your Study Pack, call or send ‘YES’ to the phone numbers below.

Market technicals for the day were positive and mixed with low volume and positive market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 86% and ‘sell’ volume at 14%. Volume index was 0.85 of the day’s total transactions.
The momentum behind the day’s market performance was further strengthened despite the prevailing weak situation, as shown in the money flow index at 32.83bps, up sharply from previous day’s 25.37bps, indicating that funds are entering some stocks and the market gradually in the midst of low liquidity.

Index and Market Cap
At the end of the midweek trading session, the NSEAll share index shed marginal 5.88bps, closing at 32, 375.12bps, after opening at 32,381bps, representing a 0.02% slide, just as market capitalisation dropped by N2.14bn to close flat at N11.82tr, which represented 0.02% value loss.
Notwithstanding, this is the time to join Investdata Buy & Sell Signal setup, where you can look over our shoulder and follow to know when to hold cash and take advantage of the watchlist of stocks for different investment purposes that you can position in for maximum gains in the coming weeks and months given that the lingering market decline has and continues to create new entry opportunities. To become a member, send: YES or STOCKS to the phone numbers below. The number of stocks on our watch list has increased due to the prolonged correction. Take advantage of this service to BUY and SELL right.
Midweek downturn was impacted by losses suffered by low, medium and high cap stocks like, International Brewery, PZ Cussons, UBA, FBNH, AXA Mansard and Hallmark Insurance, among others. This impacted slightly on the NSE’s Year-to-Date return, following which the loss inched to 15.34%, while market capitalization for same period is down N1.79 trillion, or 13.15% from the year’s opening value.

Mixed Sectoral Performance
The sectors indexes were largely bullish for the day except for NSE Consumers and Insurance that closed lower, as the weak purchasing power tells on consumer goods sector and uncertainties as insurance operators begin the jostle for funds to meet the new three-tiered minimum capital bases prescribed by the industry’s primary regulator- the National Insurance Commission (NAICOM).
Market breadth remain positive for the session with advancers outweighing decliners in the ratio of 24:13, even as market activities in volume and value terms were down 39.95% and 62.32% respectively, to 190.35m shares worth N1.77bn, from previous day’s 267.81m units valued at N2.65bn. This was largely driven by financial services, oil and conglomerates stocks like: Redstar Express, Zenith Bank, Oando, Transcorp and Fidelity Bank
Forte Oil and CCNN were the best performing stocks, topping the advancers’ table after gaining 10% and 9.7% respectively to close at N22 and N24.80 each respectively, purely on their low-price sentiment and expected better Q3 numbers.
On the flip side, AXA Mansard Insurance and PZ were the worst performing, shedding 9.6% and 7.4% of their opening value respectively to close at N2.06and N12.5 on market forces and bearish trend.

Market Outlook
We expect the market to continue in this direction over the next few days, ahead end of the quarterly rally that will usher in Q3 earning season in October, in the midst of rising oil prices, as well as the expected new policy statement and reform to stimulate the economy again. The ongoing volatility is likely to persist as bargain hunters take advantage of the low-price regime, in the midst of continued selloffs and political risk, especially as shadow elections by political parties kick off any moment from now.

Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space. Meanwhile, analysing the actual numbers released has given basic insights into company earnings that are likely to drive prices and determine market valuation.
Investors should review their positions in line with investment goals, vis-à-vis strength of 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,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.

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Ambrose Omordion
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