Investors Await Q3 Earnings Reports To Rebalance Portfolios, Ahead Of Year-End

Market Update for Octobr2, 2018

The market had a volatile session on Tuesday, opening the week on a negative note.
Monday was observed as a public holiday to mark Nigeria’s 58th independence anniversary.
The NSE index rolled over marginally at the opening, testing the previous trading session’s resistance level, before pulling back on profit taking and recent macro-economic indices emanating from the Central Bank of Nigeria and the National Bureau of Statistics (NBS).

Also, the Purchasing Managers’ Index (PMI) for the month of September released by the CBN showed a decline to 56.2 points, from 57.1 points in August, indicating slowdown in Nigeria’s manufacturing and real sector activities. This is also interpreted as a further confirmation and pointer to fears expressed by members of the Monetary Policy Committee (MPC)of the CBN as captured by the communiqué issued at the end of their September 23 and 24, 2018 meeting. The committee had warned that unless something urgent was done to rev the economy, Nigeria may slip into recession again. Stimulating the economy is no rocket science. There is need for proper implementation of 2018 budget, just as expected electioneering campaign spending should begin, so as to boost economic activities, especially at the bottom of the pyramid, despite the fear inflation rate spiraling.
In the last quarter, the manufacturing PM1 had trended up and down from 56.8 points in July to 57.1 in August down again to 56.2 in September to hit the lowest since December 2017.

The NSE opened up, in the morning after which it rallied marginally by the mid-morning before correcting from intraday high of 32,815.19 basis points to touch a low of 32,695.45bps and then retracing back to close the day red at 32,711.65 bps on a low traded volume.
Tuesday’s market technicals were negative with high sell sentiments, low volume traded and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 86% and ‘buy’ position at 14%. Volume index was 0.80of the day’s total transactions.

The momentum behind the day’s market performance was however weak, despite showing relative strength in recent days, as reflected in the money flow index at 56.22bps, which fell slightly down from previous day’s 56.82points, indicating that funds exited some stocks due to profit booking in the midst of the prevailing low market liquidity.

Index and Market Cap
The All Share index at the end of the day lost 54.72bps, closing at 32, 711.65 basis points, after opening at 32,766.37bps, representing a 0.17% decline, just as market capitalization lost N19.98bn, closing at N11.94tr, from N11.96tr, representing a 0.17% value loss.
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The session’s downturn followed losses suffered by stocks like Nestle, Guaranty Trust Bank, Flour Mills, CCNN, Guinness, Dangote Sugar and Uacn Property, bringing the NSE’s Year-to-Date return to 14.46%, while market capitalisation dropped by N1.67tr, representing 12.25% from the opening value.

Mixed Sector Performance
Sectorial performance for the day was largely bearish, except for the NSE Banking and Oil/Gas. Market breadth was negative as decliners outpaced advancers in the ratio of 17:15, reversing Friday’s flat position.
Market activities in volume and value were up by 0.06% and 19.86% respectively to 184.59m shares worth N2.38bn, from the previous day’s 184.53m units valued at N2.82bn.

Transactions were boosted by trading in financial service stocks like: FCMB, Guaranty Trust Bank, Zenith Bank, Fidelity Bank and UBA.
Forte Oil and Fidelity Bank were the best stocks as they topped the advancers’ table, after gaining 6.75%and 5.9% respectively to close at N21.40 and N1.80, purely on market sentiments and forces, ahead of expected Q3 numbers. On the flip side, AG Leventis and First Aluminum lost 10% each, closing at N0.37 apiece on market forces and profit booking.

Market Outlook
We expect the market to remain volatile as profit takers and bargain hunters interplay the market ahead of Q3 earnings reporting season that kicks soon, in the midst of political risk especially with primaries ongoing across the country.
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 the market 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
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