Volatility May Persist As Fund Managers Rebalance Portfolios, Watch Political Space

Market Update for November 21

Midweek’s trading activities on the Nigerian Stock Exchange after Tuesday’s ay public holiday, was volatile closing with a big loss that reversed Monday’s gain on improved volume that was driven by selloffs in banking and industrial goods stocks.

The NSE’s composite All-Share index started the day trading with a gap up which was extended to mid-morning before pulling back at the midday to afternoon session as blue-chip stocks depreciated in value, owing to bargain hunting from the few days rally.
The index however touched an intraday high of 32,357,22 basis points, from a low of 31,968.13bps before finishing the session below the 32,000 psychological line on a high volume and negative market breadth.

MACD on daily time frame is signaling bearish crossover of the signal line which supports continuation of trend, as RSI pulled back to read 41.20.
Meanwhile, the National Bureau of Statistics (NBS), on Wednesday published the October 2018 inflation report, defying all hopes of a sustained uptrend as projected by analysts and economists. Headline inflation came down by 0.02% point to 11.26% from 11.28% in September. Food index was slightly down by 3 points, an indication that the relative expansion in October’s Purchasing Managers Index and the dwindling economic activities have affected prices, given that the anticipated influence of this year’s budget implementation and ongoing electioneering spending are yet to reflect on the system.

Despite the marginal decline, the October inflation report is expected to influence the outcome of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting, the last for the year, as members would most likely retain the benchmark Monetary Policy Rate (MPR) at 14%.
Market technicals at mid-week’s trading session were negative and mixed as volume traded was high in the midst of negative market breadth and strong selling sentiment as revealed by Investdata’s Daily Sentiment Report, which shows a sell position of 100% and 0% buy volume. The volume index for the day’s total transactions was 0.98, while momentum behind the market’s performance was weak, going by the drop in Money Flow index to 48.89bps, from previous day’s 49.20ps, indicating that funds are leaving some stocks and the market.

Index and Market Cap
Trading ended with the benchmark index shed 252.45bps, to close at 31,968.79bps after opening at 32,222.24bps, representing 0.78% decline, just as market capitalization lost N92.17bn to close, at N11.67tr from an opening value of N11.76tr, representing a 0.78% dip in value.

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Midweek’s downturn was impacted by losses suffered by Dangote Cement, Presco, Guaranty Trust Bank, Zenith Bank, Lafarge Africa, CCNN, Dangote Sugar, Access Bank, ETI, Cadbury, FBNH and Honeywell. This reflected on the negative Year-to-Date returns, which inched to 16.40%, while market capitalization YTD decline rose to N1.95tr from its opening level in January, representing 14.87% drop.

Mixed Sectors Indices
Sectorial performance was largely bullish, except for the NSE Banking and Industrial goods that closed red, just as market breadth was negative with decliners outnumbering advancers in the ratio of 22:10.
Market activities were up in volume and value by 60.53% and 95.02% respectively at 237.75m shares worth N3.5bn, from previous day’s 148.1m units valued at N1.8bn.

Transaction volume was boosted by financial services and Oil/Gas stocks like: Oando, Zenith Bank, FCMB, Guaranty Trust Bank AND Fidelity Bank
At the close of trading, 11 Plc and Prestige Assurance were the best performing stocks, leading the advancers’ table, after gaining 10% and 9.84% respectively to close at N165 and N0.67 each on market sentiments; while the decliners’ side was led by Unity Bank and Jaiz Bank lost 8.6% each to close at N0.85 and N0.24 respectively, on market trend.

Market Outlook
As we have earlier said, speculative activities will shape the performance of the market going forward given that there is no new incentive for the market so far, until there is a change in the narrative and outcome of MPC meeting. Going by the timetable of the National Bureau of Statistics (NBS) released earlier in the year, the nation’s Q3 Gross Domestic Product (GDP) report is slated for release on Tuesday, November 27, same date as the Q3 capital importation report.

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.

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/2018/11/volatility-may-persist-as-fund-managers-rebalance-portfolios-watch-political-space/