Profit Taking, Volatility May Persist Amidst Year-end Portfolio Realignment, Bargain Hunting

Market Update for December 27
It was yet another volatile session on the Nigerian Stock Exchange on Thursday, laced with profit booking, as the benchmark indexes closed lower on mixed sentiments ahead of year-end window dressing by fund managers and others.

This oscillating trend is likely to continue, going into the New Year, as economic fundamentals become weaker, just as oil price trades below the Federal Government’s 2018 and 2019 budget benchmark. The Federal Government has retained its 2018 oil benchmark price of $60 per barrel for 2019, a level considered over ambitious, at a time Iran, with four times of Nigeria’s reserves and almost twice of its capacity has set a benchmark of $54pb.

Also not helping matters is that with less than 50 days to the Presidential Election scheduled for February 16, 2019, the blame game over the sorry state of the nation and indeed the economy has become even more intense. Unbridled attack on personality has remained the campaign strategy of the major political parties at the detriment of the expected robust discussions on how to fix Nigeria’s shaky economy. Noteworthy is that the Federal Government’s Economic Recovery & Growth Plan (ERGP) has done little or nothing to reposition the economy for growth, judging by the rising public debt profile, among others.

Trading opened on the NSE index after the Christmas holiday on a gap down as short-term players cashed out after jump on Monday, December 24, 2018, from the morning session till afternoon. It however retraced up marginally at few minutes to close, even as the positive divergence remained strong, despite the intraday pullback from the highs of 31,967.01 basis points to low of 31,569.28bps before finally closing at 31,692.63bps on a positive market breadth.

As events continue unfolding ahead of 2019, one major factor that will determine the direction of the market, besides the election tide remains the 2018 full-year earnings reporting season between February and March in expectation of smart money pushing equity prices up, as yield curve in developed markets are looking down despite the hike in interest rates. The fact that funds leaving these advance markets to emerging markets will be a plus for our market. Unfortunately however, at a time like this, the economic front and political environment are blinking, due to the lack of clear economic policies and selfish politicking.

Market technicals for Thursday were strong but mixed as traded volume was high but less than previous day’s in the midst of positive breadth and strong selling pressure as revealed by Investdata’s Daily Sentiment Report, showing a sell position of 69% and 31% buy volume. Volume index for the day’s total transactions was 1.59, while the momentum behind the market’s performance was up, as reflected in the money flow index at 52.57bps, which rose from previous day’s 49.44bps, indicating that funds entered the market and some stocks, despite the profit taking.

Index and Market Cap
The NSE’s composite Index 274.38 points to close at 31,692.63bps, after opening at 31,967.01bps which represents 0.86% decline, just as market capitalization dropped by N100.22bn to N11.58tr, from an opening value of N11.68tr, representing a 0.86% value loss.

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Thursday’s downturn was due to profit taking in stocks like: Dangote Cement, Flour Mills, FBNH, UACN, Access Bank, Wema Bank, Dangote Sugar and Dangote Flour, among others, which raised Year-to-Date loss to 17.13%. Market capitalization decline YTD stood at N2.27tr, from its opening level in January, representing 15.18% decline during the period.

Mixed Sectors Indices
The sectoral performance indices were largely bullish, except for the NSE Insurance and Industrial goods indexes that were in red, while market breadth remained positive with advancers outweighing decliners in the ratio of 30:16. Market activities were down in volume and value by 36.75% and 49.78% respectively as 452.26m shares worth N2.61bn changed hands, compared to the previous session’s 715.04m units valued at N5.19bn. Transactions volume for the day were driven by MedView Airline, NEM Insurance, Transcorp, Fidelity Bank and Access Bank.

The best performing stocks for the session were Conoil and Mutual Benefits which gained 10% each, closing at N23.10 and N0.22 each, apparently on the back of market forces and low price attraction. The day’s decliners side was led by UACN and NEM Insurance, following their 10%% and 9.15% slide, closing at N10.80 and N2.68 each, on profit booking.

Market Outlook
Expect this trend of profit taking and sustained volatility amidst bargain hunting and portfolio repositioningfor year-end to shape performance of the market in the last two days of 2018.

MACD on weekly and daily time frame have crossed over on high volume, which supports uptrend, depending on market forces as the year winds down, even as the market is still resisting further decline.
The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of full year company earnings position and post-election market dynamics. These are likely to drive prices north, or south, while determining market direction before or after the Presidential Election.
Investors should review their positions in line with their 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 low in the midst of weak company, economic and market fundamentals.

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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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