Sustained Volatility, As Investors Continue Review Of Positions Ahead Year-end

Market Update for December 11

Despite a seeming rebound at the end of Tuesday’s trading, the benchmark All-Share index of the Nigerian Stock Exchange (NSE) closed on a positive note amidst positive sentiments, with strong buying pressure as revealed by Investdata’s Daily Sentiment Report, which shows a buy volume of 78% and 22% sell position.

Tuesday’s reversal occurred after the indicators suffered a decline in the morning making new lows, after which he NSE Index climbed from 30,542.90 basis points, and thereafter rallied sharply to 30,769.60bps, swinging about 103.99 points from top to bottom. It pulled back about 50.9 points at the end of the day.

Nigeria’s GDP report for the third quarter ended September as published Tuesday by the National Bureau of Statistics (NBS) showed improvement (READ), which is expected to support corporate performances in the final quarter of the year. This follows from the fact that economic activities in the previous two have been looking up and are likely to impact the expected year-end rally that would usher in the 2019 general elections. Investors and traders should expect this, given that pre-election, the Nigerian economy is at its worst in history, a situation analysts have linked to a lack of clear economic direction, as well as the leadership style of government. There is also the factor of uncertainties in the political environment ahead of the elections as foreign and domestic investors have since switch to a wait-and-see mode, while investor and public confidence remain low.

Another critical data released on Tuesday by the NBS was the capital importation report showing that capital imported in whatever form into the country in the third quarter of 2018 dropped by about 50% quarter-on quarter (READ MORE). The entire picture becomes worse, when considered against the backdrop of the country’s declining trade balance as government continues struggling to implement its 2018 budget.

Tuesday’s market technicals were positive and strong as volume traded was higher than previous day’s in the midst of positive market breadth, while the volume index for the day’s total transactions was 0.87.

Index and Market Cap
The NSE composite All Share index for the session gained 103.99bps, closing at 30,718.70bps from the 30,614.73bps opening figure, representing 0.34% growth, just as market capitalization rose by N43.88bn, closing at N11.22tr from an opening value of N11.18tr, representing a 0.39% value gain as a result of additional 26.878m shares added to those outstanding in favour of Stanbic IBTC during the trading session.

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The rebound was impacted by value gain in stocks like: Dangote Cement, Nigerian Breweries, Zenith Bank, UACN, UBA, Forte Oil and Flour Mills among others, which reduced Year-to-Date loss to 19.68%. Market capitalization YTD decline reduced to N2.39tr from its opening level in January, representing 17.55% decline during the period.

Mixed Sectors Indices
The sectoral indices were largely bullish except for the NSE Banking and Insurance that were in the red, just as market breadth turned positive with advancers outweighing decliners in the ratio of 23:16.
Market activities were up in volume and value by 0.65% and 93.14% respectively to 215.38m shares worth N3.4bn from the previous day’s 164.55m units valued at N1.67bn, with transaction volume driven by financial services stocks like: Zenith Bank, Sterling Bank, FBNH, Diamond Bank and Fidelity Bank.

Veritaskapital and Law Union Assurance were the best performing stocks, topping the advancers table, after gaining 9.52% and 8.51% respectively, closing at N0.23 and N0.51 each on market forces and low prices. The decliners’ side was led by C & I Leasing lost 9.79%, soon after announcing its proposed four-to-one share reconstruction (READ), just as Prestige Assurance shed 8.51%, to close at N1.75 and N0.48 respectively.

Market Outlook
We expect this volatility to be sustained as bargain hunting and portfolio repositioning for year-end to shape performance of the market ahead of Santa Claus rally, as number of companies hitting new 52-week low are on the increased to reflect undervalue state of the market.

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
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Tel: 08028164085, 08032055467

https://investdata.com.ng/2018/12/sustained-volatility-as-investors-continue-review-of-positions-ahead-year-end/