With No New Narrative, Volatility Still, As Invests Review Q3 Numbers Ahead Year-End

Market Update for November 1, 2018

Trading on the Nigerian Stock Exchange for the first day in November ended negative, with a sharp decline that dragged the benchmark All-Share index to its 17-month lower lows on strong selling pressure, amidst high transaction volume. The market consolidated on a weak follow-through session, as it extended to three consecutive days of downtrend.

The NSE Index opened the day on a slight upside in the morning, before pulling back sharply by the mid-morning to afternoon session to breakdown the strong support level on a selloff and profit booking. It touched intraday lows of 32,006.65 from a high of .32, 477.99 to extend the corrective wave in advance with all the indices finishing lower.

Meanwhile, mixed economic data continue to emanate from the Central Bank of Nigeria (CBN), as shown in the Purchasing Managers’ Index (PMI) report for October released on Wednesday, indicating that a rebound in the nation’s manufacturing sector. PMI for the month stood at 56.8 points, from 56.2 points in September, suggesting a good start for the last quarter of the year.

The just concluded earnings season has revealed the nation’s weak economic position in Q3, a situation analysts and operators are waiting to confirm when Nigeria’s GDP report is released by the National Bureau of Statistics (NBS), ahead of next year’s general elections. Strong pointers to Nigeria’s dwindling economic activities are the Q3 corporate earnings that were generally weak, although many companies recorded mixed performance. Other pointers to the fact that the nation’s economic managers need to do much more for the good of the citizenry, include the recently released Ease of Doing Business Report of the World Bank Group, which ranked Nigeria 146 out of 190 countries in the world, coming way behind Mauritius, Rwanda and Kenya; besides the declining external reserves (READ MORE) at a time of rising oil price and low liquidity in the system.

PMI Movement in the last 1Year (Nov 2017-Oct 2018)


Thursday’s market technicals were negative with high volume traded amidst negative market breadth and sentiment, as revealed by Investdata’s Daily Sentiment Report, showing a sell volume of 100% and buy position of 0%. The volume index for the day’s total transactions was 1.55.

The energy behind the day’s market performance was further weakened, reflecting that the selloff continued after the close of the earnings season as investors digest the numbers as a basis for portfolio review. Money flow index for day, moved lower at 60.38bps, from previous day’s 67.87ps, an indication that funds are leaving stocks in the midst portfolio rebalancing.

Index and Market Cap
At the end of Thursday’s session, the NSE All Share Index shed 459.62bps, closing at 32,006.65bps, after opening at 33.466. 27bps, representing 1.42% decline. Similarly, market capitalization lost N167.8bn, closing at N11.68tr, from an opening value of N11.84tr, representing a 1.42% value loss.

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Thursday’s downturn was impacted heavily by selloffs in highly capitalized stocks like: Dangote Cement,Nestle, Guaranty Trust Bank, Zenith Bank, CCNN, FBNH, Cadbury, Oando, Dangote Flour, Dangote Sugar and Fidelity Bank. This impacted negatively on the Year-to-Date returns, to 16.31%, while market capitalization notched to N1.92, representing 14.46% drop, from the opening value.

Bearish Sectors Indices
All the Sectorial indexes were down on general selloffs and profit booking. Market breadth was negative, as decliners outnumbered advancers in the ratio of 24:11, to continue the three-day down market.
Market activities were up in volume and value by 67.41% and 29.02% respectively at 355.76m shares worth N4.86bn were traded, compared to previous day’s 212.51m units valued at N3.77bn, boosted by trading in financial services and conglomerate stocks like: FCMB, Guaranty Trust Bank, Zenith Bank, Transcorp and FBNH.

Japual Oil and Neimeth Pharm were the best performing stocks, gaining 10% and 9.09% respectively to close atN0.22 and N0.60 per share, on market forces. On the flip side, Cadbury and CAP lost 10% and 9.97% each to close at N9.00 and N25.75 each on market forces and bearish trend.

Market Outlook
Being the last trading day of the week that have been on selloff immediately after the Q3 earnings reporting season, the trend is likely to continue as investors digest company numbers, given that there is no new factors for the market to consider 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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info@investdataonline.com
info@investdata.com.ng
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https://investdata.com.ng/2018/11/with-no-new-narrative-volatility-still-as-invests-review-q3-numbers-ahead-year-end/