Volatility May Persist, As Inflow Of Q3 Data Raise Bargain Hunting Tempo On NGSE

Market Update for October 15, 2018

Nigeria’s stock market on Monday had an uneven consolidation as it halted previous the positive sentiment of previous session, amidst continued volatility triggered by the perceived risks in the political environment that has refused to go away. One factor that may continue to heat up the horizon is last week’s Executive Order issued by the Federal Government barring some high profile politicians, mostly in the opposition, from traveling outside of the country (READ MORE).

This action, coming barely four months to February’s general elections is likely to further erode investors’ confidence and liquidity in the system, despite efforts by the Securities & Exchange Commission (SEC Nigeria) to reassure investors on the soundness of the nation’s stock market fundamentals.
The NSE benchmark All-Share index, on Monday, attempted to resist further decline several times, but could not hold through, touching intraday low of 32,390.23 basis points, from a high of 32,474.42bps. It retraced up later in the day, but finished weak at the close of trading.

Also on Monday, Conoil Plc filed its Q3 earnings report for the period ended September 30, 2018 earlier than expected, going by the company historical pattern and dates, given that the 2017Q3 account was released to the market October 31, 2017 (READ MORE). The numbers, however, give insight to what the market should expect from companies in the NSE’s Oil/Gas sector.

Market technicals for the day were negative on a ridiculously low traded volume and negative market breadth, amidst high selling pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 78% and buy position of 22%. The volume index for the day’s total transactions was 0.49.
The impetus behind the day’s market performance was strengthened despite the profit taking and the wait-and-see attitude of many investors at a time many others move to safe havens, as reflected in the money flow index at 38.10bps, from previous day’s 32.91bps. This is an indication that funds are entering some stocks, despite low liquidity in the market.

Index and Market Cap
The NSEASI on Monday, shed 43.50bps, closing at 32,413.48bps, after opening at 32,456.98bps, representing a 0.13% decline, just as market capitalization lost N15.88bn to close at N11.83tr, from N11.85tr, representing a 0.13%, at a time more corporate earnings are expected to hit the market soon.

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Monday’s downturn followed losses suffered by medium and high cap stocks like: Nigerian Breweries, Lafarge Africa, Guinness, FBNH, Dangote Flour and Honeywell, bringing Year-to-Date negative returns to 15.24% and market capitalization to N1.8tr, representing a 13.12% drop, from the opening value.

Mixed Sector Performance
Monday’s sectorial performance was largely bullish, except for the NSE Consumer and Industrial Goods, which closed lower. Market breadth was negative as decliners outnumbered advancers in the ratio of 15:13, to upturn the bull transition.

Market activities were down in volume and value by 43.72% and 57.08% respectively to 91.41m shares worth N960.91m, from Friday’s 162.41m units valued at N2.24bn, with transactions boosted by trading in financial services and consumer goods stocks like: UBA, FCMB, Fidelity Bank, Guaranty Trust Bank and Honeywell flour.

AXA Mansard Insurance and Forte Oil were the best performing stocks, after chalking 10% and 9.88% respectively, closing at N1.98 and N22.25 per share, on the impact of market forces and earnings expectations. On the flip side, Fidson Healthcare and Wapic Insurance lost 10% and 9.09% respectively, closing at N5.40 and N0.40 each on profit taking and market forces.

Market Outlook
With the hope that more companies would release their scorecards, expect increased bargain hunting in the midst of volatility and profit taking. If the numbers beat market and analysts forecast. Also, the September inflation data is being expected. Investdata projects that it could be in the region of 11.49%, with expected electioneering spending to boost activities.
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
https://investdata.com.ng/2018/10/volatility-may-persist-as-inflow-of-q3-data-raise-bargain-hunting-tempo-on-ngse/