MARKET UPDATE FOR OCTOBER 22, 2018

For the third consecutive trading session, the basic indicators of the Nigerian Stock Exchange (NSE) closed positive on Monday, despite a sustained volatility elevated in the midst of a slow recovery amidst the inflow of third quarter earnings reports from quoted companies, which have so far remained mixed in performance and earnings power, when compared to the previous nine-month figures.

Dangote Cement Plc, the market’s most capitalized stock presented its audited nine-month financials during the session, which came below forecast and expectation of the market despite the marginal growth in profitability ratios. Bottom-line for the period limped 2.7% to N158.28bn, translating to Earnings Per Share (EPS) of 929 kobo, compared to the previous 904 kobo posted in 2017 (READ MORE).

The market seem to have signal another recovery move at the peak of the earnings season which will be confirmed by Tuesday’s session, if the market has really bottomed out, because the only driving force for the market at this point is the earnings reports, given that the political uncertainties ahead of the 2019 general elections are still intact. There are also factors such as low liquidity and weak macroeconomic indices, as well as the huge government borrowing to refinance its budgets due to the hugely underperforming government earnings, particularly from the non-oil sectors like manufacturing, agriculture and service. The expected infrastructure to boost economic fundamental and recovery are not there yet, despite all the huge budgets and borrowing so far.

The NSE All-Share index opened Monday’s trading a little on the upside, which was sustained through the mid-morning to afternoon on improved buying pressure to hit intraday highs of 32,986.93 basis points, from lows of 32,841.69bps. It broke out the recent resistance level, before pulling back at the last few minutes to close the session at 32,962.82bps on profit booking, as the index trades above the shortest Moving Average of 21-day ADX of 20.

Market technicals for the day were positive mixed as sentiment, and high traded volume in the midst of a flat market breadth and strong buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a positive ‘buy’ of 83% and sell volume of 17%. The volume index for the day’s total transactions was 1.23.
Energy behind the day’s market performance was strengthened to hit highest since June, despite the relative low liquidity in the market. The money flow index for the session stood at 60.49bps, from previous day’s 53.14bps, an indication that funds are reentering some stocksas bargain hunting increased.

Index and Market Cap
Trading on Monday ended with the Composite NSE Index gaining 121.13bps to close at 32,962.82bps, after opening at 32,841.89bps, representing a 0.37% growth. Similarly, market capitalization climbed N44.22bn up, closing at N12.03tr, from N11.99tr, representing a 0.37%, value gain.

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The session’s positive close followed price appreciation by medium and high cap stocks like: Seplat, Unilever, Fidelity Bank, Zenith Bank, FBNH, Oando, Forte Oil and Diamond Bank, which impacted on Year-to-Date returns, reducing the loss to 13.81%, and market capitalization to N1.49tr, representing 11.32% drop, from the opening value.

Bullish Sectors Indices
Sectorial performance indexes were largely bullish, except for the NSE Industrial that closed 2.68% lower, while NSE Oil/Gas chalked 2.78%. Market breadth was at equilibrium as there were same number of decliners’ and advancers in the ratio of 17:17, to sustain the bull transition.
Market activities were up in volume and value by 21.29% and 239.85% respectively at 257.92m shares worth N4.95bn, as against previous day’s 212.65m units valued at N1.46bn, while transactions were boosted by trading in financial services stocks like: GTBank, Diamond Bank, UACN, FCMB and Sterling Bank
Unilever and Custodian investment Plc were the best performing stocks, chalking 8.20% and 7.84% respectively to close at N47.5 and N5.50 per share, on the impact of market forces and expected Q3 earnings reports. On the flip side, Lafarge Africa and Niemth Pharmaceuticals lost 10% each, closing at N18.90 and N0.54 each on poor earnings and profit booking.

Market Outlook
Expect profit taking to continue as more companies present their numbers in the coming days, amidst increased bargain hunting activities, while volatility and profit taking continue, if the numbers beat market and analysts forecast.
The much anticipated Q3 earnings reports would assist investors and fund managers rebalance their portfolios, while watching the political space and analysing the actual numbers that will give insights into expectations for Q3 GDP and full year company earnings power. These are likely to drive prices north, or south, while determining market direction before or after Presidential 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/profit-taking-may-linger-amidst-inflow-of-q3-numbers-bargain-hunting-activities/