Sustained Rebound Ahead, Amidst Low Price Attraction, Repositioning For 2018 Earnings

Market Update for January 10

The Nigerian Stock Exchange on Thursday recorded its first positive close for the year 2019 after six consecutive sessions of back-to-back losses, halting the bear-run on mixed sentiments and above-average traded volume.
The reversal was purely technical, the seeming low price attraction and the fact that many stocks are gradually resisting further decline.
However, note that there is an expected last stage of panic selling that will resurface after this seeming rebound before Nigeria’s general elections.

This first gain in 2019 was driven by relatively improved buying interest in banking, industrial goods and oil stocks. Expanding capacity in the cement industry and the relatively low prices has triggered buying interest ahead of dividend and impact of their rising capacity and earnings power. Also, the seeming rise in oil price is expected to influence the petroleum stocks and the general market.

The benchmark index opened on a gap to the upside in the morning till mid-morning, before pulling back in the midday to intraday low of 29,329.62 basis points, from the highs of 29,612.33bps. It then rebounded in the early afternoon until the session closed at 29,517.73 on positive market breadth.

Market technicals for the day were positive and strong as traded volume was higher than previous day’s in the midst of positive breadth and sentiment, as revealed by Investdata’s Daily Sentiment Report, showing a buy volume of 67% and 33% sell position. Volume index for day’s total transactions was 1.15, just as energy behind the day’s market performance was down and weak. This was reflected in the 25.89bps money flow index from previous day’s 31.29bps, to indicate that funds are leaving the market as the polls comes closer.

Index and Market Cap
At the end of Thursday’s trading, the composite NSE All-Share Index gained 180.93bpsto close at 29,517.73bps, from 29,338.80bps, representing 0.62% growth. Market capitalization went up by N67.47bn, closing at N11.47tr, from the opening value of N10.94tr, representing a 0.62% value gain.

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The market turn-up followed capital appreciation of banking and industrial Goods stocks like Dangote Cement, Guaranty Trust Bank, Zenith Bank, FBNHolding, UBA and Diamond Bank as well as Honeywell flour and Dangote Flour. These reduced Year-to-Date loss to 6.09%, while market capitalization losses dropped to N584.26bn, from its opening level of N11.72tr representing a 6.66% decline.

Mixed Sectors Indices

All sectoral indices closed largely bullish, except for the NSE Consumer Goods and Insurance that closed in the red. Banking, Industrial and Oil/Gas were up by 2.72%, 2.24 %and 0.13% respectively. Market breadth was positive, as advancers outnumbered decliners in the ratio of 19:14. Market activities were up in volume and value by 64.03% and 36.61% to 385.29m shares worth N3.07bn from the previous day’s 234.9m units valued at N2.25bn. Transaction volume was boosted by financial services stocks: Custodian Investment plc, Access Bank, FBNH, Diamond Bank and UBA.

Law Union Insurance and Julius Berger were the best performing stocks, topping the advancers table, after gaining 10% and 9.86% respectively to close at N0.55 and N28.40each, on market forces and expectation of 2018 full year earnings . On the flipside, Guinness and NEM Insurance led the decliners’ table, losing 10% and 9.98% respectively to close at N63.00 and N1.72 each, on profit taking and sentiment.

Market Outlook
We expect the retracement to be sustained on market forces, regardless of the index breaking down the 30,000 mark which was confirmed at the end of midweek’s trading, such that 28,000bps support level may be the last level before any rebound. MACD has turned bearish on crossing signal line to support the ongoing trend and volatility amidst repositioning for 2018 full year earnings season to shape market performance ahead of the various factors listed above. We advise cautious trading and investing in the days ahead.

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 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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ambrose.o@investdataonline.com
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Tel: 08028164085, 08032055467
https://investdata.com.ng/2019/01/sustained-rebound-ahead-amidst-low-price-attraction/