More Volatility Ahead, Amidst Bargain Hunting, Q3 Numbers Hit NGSE

MARKET UPDATE FOR OCTOBER 16, 2018

It was another interesting session on the Nigerian Stock Exchange on Tuesday as volatility continued, with the indicators closing the day positive, thereby reducing some of the losses recorded so far in the month.

The day’s rebound was driven by increased positioning by bargain hunters in uuder-valued blue-chip and highly capitalised stocks in the midst of weak macro-economic indicators including the nation’s reserves, which has continued to decline. It has so far lost 2.94% of the month’s opening value in just 15 days (READ MORE). Also, worrisome is the upswing in Nigeria’s consumer price index at 11.28% (year-on-year) at the end of September 2018, after 18 consecutive months of declining growth rate (READ MORE). Worrisome, in the light of the electioneering activities leading to next year’s general elections in Nigeria.

The corporate earnings released so far has not been altogether disappointing, judging by the few Q3 financials presented by the likes of petroleum marketing major- Conoil Plc (READ), followed by that of United Bank for Africa Plc (READ) after close of trading on Tuesday. Nonetheless, there is yet no surprising numbers from these numbers, but they have however given insights into what should be expected in the sectors they operate.

Still on UBA Plc, it maintained its historical pattern and dates as for Q3 results, which was released same date to the market- October 16, 2017. The bank’s numbers for the period were mild, but will however still support the price due to its low price compared to intrisic value, given the N1.74 Earnings Per Share, which signaled the possibility of dividend payment at the end of its financial year on December 31 (all things being equal).

The Nigerian Stock Exchange (NSE) All-Share index, on Tuesday, started out with a little gap up in the morning, which was sustained until the mid-morning, before bursting out at the midday to afternoon segments. This was when it touched intraday highs of 32,736.75 basis points, from a low of 32,413.00bps, before pulling back marginally on profit taking to close the day strong at 32,722.18bps.

Tuesday’s market technicals were positive, but mixed with huge volume traded and a negative market breadth in the midst of high demand for stocks as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 95% and sell volume of 5%. The volume index for the day’s total transactions was 3.24.

Momentum behind the day’s market performance was further strengthened despite the negative breadth as investors and traders positioned for the earnings season as reflected in the money flow index at 47.70bps, from previous day’s 38.10bps. This is an indication that funds are still entering some stocks, regardless of the prevailing low liquidity in the market.

Index and Market Cap
At the end of Tuesday’s trading session, the composite NSEASI gained 308.70bps, closing at 32,722.18bps, after opening at 32,413.46bps, representing a 0.95% growth, just as market capitalization rose by N112.7bn to N11.95tr, from N11.83tr, representing a 0.95%, at a time more corporate earnings are expected to hit the market ahead of the deadline October 31.

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Tuesday’s upturn was impacted by value appreciation in medium and high cap stocks like: Dangote Cement, Nigerian Breweries, Guinness, Unilever, Zenith Bank, Forte Oil, FBNH, Dangote Flour and UACN Property. This reduced Year-to-Date negative returns to 14.44% and market capitalization to N1.66tr, representing a 12.22% drop, from the opening value.

Mixed Sector Performance
The sectorial performance for the session was largely bullish, except for the NSE Insurance and Oil/Gas, which were in red. Market breadth was negative as decliners outpaced advancers in the ratio of 23:16, to reverse Monday’s down market.

Market activities were up in volume and value by 624.27% and 452.32% respectively to 662.02m shares worth N5.31bn, from previous day’s 91.41m units valued at N960.91m. The day’s transactions were boosted by trading in financial services stocks like: Sunu Assurance, Guaranty Trust Bank, Fidelity Bank, Zenith Bank AND FCMB.

UACN Property and Cutix were the best performing stocks, chalking 9.94% and 9.74% respectively to close at N1.77 and N2.03 per share, on the impact of market forces and earnings expectations. On the flip side, Beta Glass and Julius Berger lost 10% and 9.83% respectively, closing at N70.20 and N21.55 each on profit taking.

Market Outlook
With more companies expected to present their numbers in the coming days, expect increased bargain hunting in the midst of volatility and profit taking, if the numbers beat market and analysts forecast.
This 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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CRO|Investdata Consulting Ltd
info@investdataonline.com
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