Profit Taking, Sell-offs Persist As Investors, Analysts Watch For GDP Data, MPC Outcome

Market Update for November 5, 2018

It was a volatile session that kicked off the new trading week on the Nigerian Stock Exchange, closing this time on a negative note, as selling pressure continued among the blue chip stocks that had earlier amassed some flesh in the course of the earnings season, just as companies that posted numbers that were weak and below market expectations.

The composite NSE All-Share index fell slightly in the morning session, but retraced back up by the mid-morning, continuing to gyrate up and down through midday to the afternoon, before finally pulling back at the last minutes. It closed at 32,048.18 basis points, after touching intraday lows of 32,033.91bps, from highs of 32,182.93bps on a low traded volume. Note that transaction volume of the exchange has been on the decline since November 1.

The decreasing volume of transactions signals low activities in the market as players digest numbers that came during the just concluded earnings season, which shows the true state of various listed companies, helping to determine the outlook for investors and shareholders for year-end, as well as the possibility of dividend payment.

However, a review of the Q3 corporate earnings shows that the growth rate of top and bottom lines among companies in the service sector was better and stronger than others, due to essential services they render. This is particularly true of banks. The probability that this sector will sustain such tempo in the last quarter of the year is high, considering the faster expansion rate in the non-manufacturing sector, as shown by the October Purchasing Managers’ Index at 57 points, from 56.5 recorded in September.

PMI MovementIin Past 12 Months (Nov 2017-Oct 2018) Non-manufacturing sector


Market technicals on the NSE were negative on Tuesday, with low volume traded amidst negative market breadth and sentiment, as revealed by Investdata’s Daily Sentiment Report, showing a sell volume of 90% and buy position of 10%. The volume index for the day’s total transactions was 0.70.

The forces behind the day’s market performance was further weakened, reflecting a continuation of profit taking and selloff that continued at the end of the earnings season and portfolio rebalancing. Money flow index for day, moved lower at 45.19bps, from previous day’s 55.94ps, an indication that funds are leaving stocks in the midst portfolio reshuffling.

Index and Market Cap
At the end of Monday’s session, the NSE All Share Index shed 76.76bps, closing at 32,048.19bps, after opening at 32,124.94bps, representing 0.24% decline. Similarly, market capitalization lost N28.02bn, closing at N11.7tr, from an opening value of N11.73tr, a 0.24% value dip.

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Monday’s downturn was impacted by selloffs and profit booking in high cap stocks like: NB, Lafarge Africa, Unilever, Access Bank, UBA, CCNN, FBNH, Oando, and Dangote Sugar. This impacted negatively on the Year-to-Date returns, to 16.2%, while market capitalization notched to N1.90tr, representing 14.38% drop, from the opening value.

Bearish Sectors Indices
Sectorial indexes were down, except for the NSE Oil/Gas that closed higher, even as market breadth was negative, as decliners outnumbered advancers in the ratio of 24:17, to reverse the previous session up market.

Market activities were down in volume and value by 39.99% and 38.56% respectively at 157.83m shares worth N1.75bn were traded, compared to previous day’s 258.12m units valued at N2.85bn. Trading received a boost from financial services stocks like: Access Bank, FCMB, Guaranty Trust Bank, Wapic and FBNH.

Cadbury and UACN were the best performing stocks, gaining 10%, with each closing at N9.90 per unit, on market forces and low prices attraction. On the flip side, CCNN and NNFM lost 9.36% and 9.35% respectively to close at N18.35 and N4.85 each on bearish trend and profit taking

Market Outlook
Expect the current trend to continue as investors digest company numbers, given that there is no new incentive for the market in November, unless and until there is a change in the narrative.

The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of the expected Q3 GDP and full year company earnings position. 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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