NIGERIA’S HEIGHTENING POLITICAL TENSION FUEL PROFIT TAKING, VOLATILITY, AMIDST PORTFOLIO REPOSITIONING

Market Update for January 28
It was yet another volatile trading session on Monday as the heightening political tension ahead of Nigeria’s February 16 Presidential election halted the bullish transition with the return of bargain hunters, even as corporate earnings season for the 2018 full-year kicks off any moment from now.

Basically, the Nigerian Stock Exchange (NSE) All-Share index opened to the downside and stayed so throughout the session. It however pulled back at midmorning, rallied, pulled back again, restarted a couple of times, and then, by mid afternoon took off, closing the day lower than it opened. This was however after touching intraday low of 31, 241.24 basis points, from a high of 31,457.07bps on a profit taking and negative breadth.

The unfolding drama between the executive and judiciary signals some kind of desperation by political office holders, leading to a relegation of the rule of law, just as the nation’s constitution continues to be trampled under feet by those expected to uphold these tenets of democracy and good governance. This has triggered another around of fear and panic in the market and entire polity, with the Nigerian Bar Association (NBA) directing its members to boycott courts across the land.

Also, the National Judiciary Council will hold an emergency meeting on Tuesday to address the issue, just as a planned reopening of the National Assembly to set the records straight on last week’s sacking of Justice Walter Onnoghen, the Chief Justice of Nigeria (CJN) was called off Monday night, as the legislative arm takes their case to the Supreme Court for arbitration. Add these to the fact that the Federal Government, on Monday night, accused governments of the U.S, UK and the European Union Observer Mission of taking sides with the opposition and therefore meddling in Nigeria’s internal affairs.

There is the urgent need to rebuild the confidence of Nigerians and international investors that the coming elections will be free and fair, especially given the huge amount of tax payers’ money spent so far in preparation for the elections.

Monday’s market technicals were negative and weak as volume traded was lower than the previous session’s in the midst of a negative breadth and mixed sentiment for stocks as revealed by Investdata’s Daily Sentiment Report, showing sell volume of 52% and 48% buy position. Volume index for day’ was 0.62

The energy behind the day’s market performance was up and strong, despite the seeming profit taking as reflected in the 64.05bps money flow index, from previous day’s 58.78bps, an indication that funds are entering some stocks still.

Index and Market Cap
At the end of trading on Monday, benchmark index NSE All-Share Index shed 82.39bps, to close at 31,344.24bps after opening at 31,426.63bps, representing 0.27% decline; while market capitalization shed N30.73bn to close at N11.69tr from the opening value of N11.72tr, representing a 0.27% value loss.

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The downturn was driven by profit booking in Seplat Petroleum, Guaranty Trust Bank, Access Bank, FBNH, Honeywell and Diamond Bank, among others, pushing Year-to-Date loss to 0.27%, while the loss in market capitalization increased to N32.3bn, from the year’s opening level N11.72tr, representing a 0.28% decline.

Bearish Sectors Indices
The fact that the market is yielding to profit taking reflected in all sectoral indices, as they closed red, except for the NSE Industrial Goods that remained green, while market breadth stayed negative, with decliners outnumbering advancers in the ratio of 30:10. Market activity were down in volume and value traded by 46.62% and 41.40% to 222.69m shares worth N1.84bn, from previous day’s 417.18m units valued at N3.14bn. Transaction was driven by financial services and conglomerates stocks: Fidelity Bank, UBA, Diamond Bank, Transcorp and FCMB.

The best performing stocks for the session were: NPF Microfinance and Union Diagnostic which gained 9.6% and 7.4% respectively, closing at N1.60 and N0.29 each on market forces, while the flipside was led by Berger Paints and Consolidated Hallmark Insurance, losing 9.76% and 8.6% respectively to close at N7.00 and N0.32 each, on market forces and profit taking.

Market Outlook
The political tension driven profit taking and volatility are expected to persist, as market players continue to reposition for 2019 dividend declaration season that will shape market performance after the elections. We advise cautious trading and investing why positioning in fundamentally sound equities.

Volatility will also linger 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.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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Tel: 08028164085, 08032055467
https://investdata.com.ng/2019/01/nigerias-heightening-political-tension-fuel-profit-taking-volatility-amidst-portfolio-repositioning/?fbclid=IwAR1KkrJD5WajXXCrOYr5-66O67bQATab994HY0mkLDfPWIOmcl0SbDBwUIk