Expect Pullback Amidst Sustained Volatility, As Investors Position For 2019 Dividend Season
The nation’s equity market started with Monday closing as a profit taking session on a increased selling pressure and huge traded volume that signaled short-term selloffs by bargain hunters after seven consecutive days of uptrend that formed a bullish ‘V‘ pattern to reflect the mixed sentiment and performance so far.
Trading started out with a nasty drop right at the opening on a sharply lower index, as highly capitalized stocks suffered losses to pull back till afternoon before retracing up marginally after touching intraday lows of 30,720.76 basis points, from a high of 31,041.06bps. However, the session finished lower to halt 5-wave extension, although technicals confirmed the decline.
All eyes are on the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting’s outcome on Tuesday, the possibility of members voting to retain the monetary framework is high. This is considering the mixed outlook of the global economy, depending on settlement of trade dispute between US and China, commodity prices and geopolitical issue confronting many economics.
The high interest rate and other instrument used by CBN to stabilized price as its sole reason will determine the next direction, with the high possibility of a pullback on profit taking in the midst of election tension in the days leading to the February 16, Presidential polls. This will expectedly affect the market despite the new move in emerging markets that continued to breakout above key moving average. The International Monetary Fund (IMF), on Monday also released its January 2019 World Economic Outlook (WEO), showing a downward review of Nigeria’s GDP projection to 2.0% (READ MORE).
Monday’s market technicals were negative and mixed as volume traded was higher than previous day’s in the midst of a negative breadth and sentiment as revealed by Investdata’s Daily Sentiment Report, showing sell volume of 96% and 4% buy position. Volume index for day’ was 1.46.
The momentum behind the day’s market performance was up, despite the profit booking, as reflected in the 35.83bps money flow index, from previous day’s 32.00bps, an indication that funds are entering some stocks, regardless of the market pullback.
Index and Market Cap
NSE All Share index on Monday shed 277.45bps, to close at 30,732.72bps after opening at 31,005.17bps, representing 0.88% decline; while market capitalization dropped by N101.6bn, closing at N11.41tr from the opening value of N11.56tr, representing a 0.88% value loss. The pullback after successful breakout of first and second resistance level at 30,576.7bps and 30,996.54bps respectively to closed on a high volume, which suggests weakness.
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Downturn for the session were driven by price depreciation of medium and high cap stocks like Seplat, Dangote Cement, 11 Plc, Guaranty Trust Bank, Oando, Transcorp, Wema Bank and Diamond Bank, among others, thereby boosted Year-to-Date loss to 2.22%. It also increased the loss in market capitalization further to N265.38bn, from the year’s opening level N11.72tr representing a 2.22% decline.
Mixed Sectors Indices
All sectoral performance indices were largely bearish, except for the NSE Industrial and Insurance that closed higher, while market breadth was negative, with decliners outnumbering advancers in the ratio of 18:13. Market activity were down in volume and value by 65.96% and 46.92% respectively to 499.21m shares worth N5.53bn from the previous day’s 301.4m units valued by N3.76bn. Monday volume was driven by financial services stocks: Diamond Bank, Guaranty Trust Bank, Zenith Bank, NEM Insurance and FBNH.
Linkage Assurance and ABC Transport were the best performing stocks for the day, after gaining 8.93% and 7.41% respectively, closing at N0.61 and N0.29 per share on market forces. On the flipside, e-Tranzact and Seplat led the decliners’ table, losing 8.71% and 7.99% respectively to close at N3.25 and N530 each, on market sentiment.
Market Outlook
We expect the pullback to continue in the midst of sustained volatility, as investors continue to reposition for 2019 dividend declaration season thatwill shape market performance after the elections. We advise cautious trading and investing why positioning in fundamentally sound equities.
The ongoing volatility will persist as investors and fund managers reposition their portfolios, with eyes fixed on 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 mixed company numbers, weak economic and market fundamentals.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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https://investdata.com.ng/2019/01/expect-pullback-amidst-sustained-volatility-as-investors-position-for-2019-dividend-season/
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