As Bear-run Lingers, Investors Review Investment Goals On NGSE, Ahead Of Q3, Full-Year

Market Update for October 4, 2018

The losing momentum on the Nigerian Stock Exchange on Thursday witnessed a reduction, as buying sentiment inched up despite the bear run extending its position to the third trading session of the week to make entry risk lower for market players.

The continued volatility and relative selloffs in recent time resulted from profit booking, weak macro-economic fundamentals and poor economic savings, apart from the political risk which had dominated the narrative for over eight months now in Nigeria.

Worse still, the prevalent high poverty rate and low investment education level have reduced the number of participants in the stock market. As a result, long-term funds in form of savings are very small, while pension fund administrators remain heavy on bonds, government infrastructural finance windows and others.

This has left the Nigeria’s stock market at the mercy of foreign portfolio investors that exit at the first sign of a red flag. A stable market needed to drive economic development and growth cannot be achieved with this kind of yoyo movement as the economy remains weak, with no government policy to support the market. Even the financial sector regulators by now are yet to come up with measures and policies that will aid the market to achieve it purpose.

The benchmark NSE index opened upside in the morning, before pulling back to recent support levels by the midday to afternoon session, after touching intraday highs of 32,526.70 basis points, from low of 32,395.25bps. This was before it retraced up in the last minutes, reducing the day’s loss when it closed at 32,423.57bps on improved traded volume.
Thursday’s market technicals were weak and mixed, with high selling pressure, low volume traded and positive market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 78 % and 22% ‘buy’ position. The volume index for the day’s total transactions was 0.68.

The force behind the day’s market performance remained up, regardless of the marginal decline recorded in the session, as reflected in the money flow index at 58.84bps, from previous day’s 58.41 points, indicating that funds entering some stocks ahead of the earnings season and last quarter repositioning of portfolios in the midst of low market liquidity.

Index and Market Cap
The NSE All Share index at the close of trading shed 30.46bps, at 32,423.57 basis points, after opening at 32,454.03bps, representing a 0.09% decline, just as market capitalization lost N11.12bn, to close at N11.84tr, from an opening value of N11.85tr which represented a 0.09% value loss.

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The downturn was due to profit taking in medium and high cap stocks like: Nigerian Breweries, ETI, Dangote Sugar, Access Bank, UBA, Honeywell and Transcorp, which further pushed Year-to-Date negative returns to 15.22%, while market capitalization lost N1.95tr, representing 13.13% slide from the opening value.

Mixed Sector Performance
The sectorial performance for the day was largely bullish, except for the NSE Consumer goods and Insurance indexes that closed red. Market breadth was positive as advancers slightly outpaced declinersin the ratio of 19:18, to continue the three bearish run.

Market activities in volume and value were up by 10.69% and 7.82% respectively to 151.35m shares worth N1.54bn, from previous day’s 136.73m units valued at N1.42bn
Transactions were boosted by trading in financial serviceand consumer goods stockslike: FCMB, Fidelity Bank, Guaranty Trust Bank, NASCON and RT Briscoe.

The best performing stocks for the day were Cutix and Sovereign Trust Insurance that topped the advancers’ table, gaining 10%and 9.09% respectively to close at N4.73 and N0.21 per share, as a result of the one-for-one bonus issue and market forces. On the flip side, Niger Insurance and Neimeth Pharmaceuticals lost 9.68% and 9.25% respectively, closing at N0.28 and N0.59 each on profit taking and market forces.

Market Outlook
Being the last trading of the week, we expect increased activities by bargain hunters in the midst of volatility and profit taking ahead of Q3 earnings reporting season that kicks off soon, despite the political risk and the ongoing primaries across the nation.

Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers that will give insights into expectations for Q3 GDP and full year companies earnings power that are likely to drive prices and determine themarket before or after February election.

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,
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
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/2018/10/as-bear-run-lingers-investors-review-investment-goals-on-ngse-ahead-of-q3-full-year/