NGSE Indices Stay Red, As Investors Rebalance Portfolios Ahead Full-Year

Market Update for the week ended November 2 and Outlook for Nov 5-9

It was yet another mixed trading week on the Nigerian Stock Exchange last week, as investors reacted negatively to late filing of corporate earnings, many of which came mixed and below expectation, especially those from the consumer goods sector. This was coupled with profit booking by traders who positioned ahead of the reporting season which officially closed within the period under review on Wednesday, October 31.

There was sustained volatility with the composite index breaking down the strong support level to halt three consecutive weeks of up market, as the indicators declined further before making slight rebound on Friday amidst interplay of strong market forces. The down market has been blamed on the seeming lack of coordination between the economic managers and government even as the 2019 general elections draw closer.

In the period under consideration, 77 companies filed their Q3 financials which came mostly weak and mixed as three quarter of companies listed on the NSE reporting; just as 80% presented weak or flat Earnings Per Share (EPS); while 68% presented weak/declining sales. The earnings growth rate for the just concluded season was the second lowest since 2014. The NSE’s Price/Earnings Ratio also suffered a decline due to the relatively low prices of stocks, despite the weak and mixed earnings posted in the period.

Stock markets around the world were mixed in the past week, as U.S stocks closed higher on strong earnings and economic data to offset the ongoing political risk as more third quarter earnings flowed in.
Back home, the market opened the week with 0.88% gain, which was short-lived as the NSE ASE shed 0.08% on Tuesday, followed on Wednesday and Thursday by the 2.12% and 1.42% loss respectively, before Friday’s 0.37% rebound. This reduced the week’s cumulative loss to 2.38% as market sentiments changed on weak numbers and profit taking.

The week’s market technicals were negative and mixed, judging by the low volume traded, negative market breadth and strong selling pressure as revealed by Investdata’s weekly Sentiment Report, showing a sell position of 92% and sell position of 8%. The volume index for total transactions within the period was 0.93.

Momentum behind the week’s trades were marginally strengthened despite the selloff, as money flow index increased to39.46bps, from 38.69bps in previous week, an indication that funds entered some stocks, while exiting others amidst portfolio rebalancing.

Equity Indicators Last Week
The NSE’s benchmark All-Share index for the week shed 782.39 basis points to close at 32,124.94bps, after opening at 32,907.33bps, representing a 2.39% decline, after touching a high of 33, 577.11bps, from low of 32,006.65bps on low volume. Similarly, market capitalization closed at N11.73tr, from an opening value of N12.03tr, representing 2.38% value depreciation.

The advancers table for the period was dominated by penny stocks as traders took profit at the end of earnings reporting season.
Meanwhile, the NSEASI’s year-to-date negative returns reduced to 16%, just as market capitalization stood to N1.94 billion which represented 14.56 % below the year’s opening value.

Bearish Sectors Indices
The performance of sectorial indices during the week was bearish, as all closed lower due to general selloffs. Market breadth was negative as decliners outweighed advancers in the ratio of 50:18, halting the bullish transition.

Market activities for the period were mixed as volume fell to 1.27bn shares from the previous 1.45m units, valued at N20.35bn, up from the previous N15.26bn, with transactions boosted by trading in financial service, consumer goods and conglomerates stocks,
The best performing stocks for the period were Presco and Neimeth, which gained 12.52% and 11.11% respectively at N59.85 and N0.60 per share, on market forces, while Unity Bank (READ MORE) and Dangote Flour shed 21.11% and 21.09% each to close at N0.71 and N5.80 on reactions to their weak earnings reports.

Market Outlook
We expect mixed performance this week, as selloff and repositioning continued, as investors and fund managers interpret the Q3 filings to enable them rebalance their portfolios, while watching the political space and analyzing the numbers expected to give an insight 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
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