Volatility May Persist As Q3 Data Assist Investors, Fund Managers Rebalance Portfolios

Market Update for January 3rd, 2019
Nigeria’s stock market had another volatile session on Thursday, extending its second day bearish outing in the New Year on a strong selling pressure driven by short-term profit booking by traders, despite the seeming improvement in economic data from the CBN and the news of 5% rebound in oil price at the international market, ahead of this month’s supply cut decision by the Organisation of Petroleum Exporting Countries (OPEC).

The benchmark Nigerian Stock Exchange (NSE) All-Share index opened with a sight gap down early Thursday and retraced up by the mid-morning, before making a sharp pull back during the session. It moved between an intraday high of 31,078.43 basis points to a low of 30,749.66bps, before closing marginally up at 0,771.32bps on a low volume indicates the wait-and-see attitude of many investors to identify reversal before jumping into any position.

In the process, the index is forming a triple bottom that supports an uptrend. The candlestick formation at the end of trading signal that reversal is imminent depending on market forces.

Investdata Research believes that January effect which was absent in early 2018 will resurface this time due to low liquidity in the market ahead of the 2019 general elections which will influence the market negatively. Positive economic or political news or information are therefore needed to reverse the trend before the presidential election and 2018 full year earnings season.

Discerning investors and members of Investdata signal group should use this opportunity to shop for companies that will grow their dividend payout which will drive price during the earnings season and avoid the companies that are likely to cut dividend.

Market technicals for the day were negative and weak as traded volume was lower than previous day’s in the midst of negative breadth and negative sentiment, as revealed by Investdata’s Daily Sentiment Report, showing a sell volume of 93% and 7% buy position. Volume index for the day’s total transactions was 0.50, while energy behind the market’s performance was marginally up, as reflected in the 36.93bps money flow index, from previous day’s 36.66bps, despite the down market and low traded volume which indicates that funds are leaving some stocks for others.

Index and Market Cap
At the end of Thursday trading, the composite NSEASI lost 298.74 points to close at 30,771.32bps, from 31,070.06bps, representing 0.96% decline, just as market capitalization shed N111.41bn, closing at N11.47tr, from the opening value of N11.57tr, representing a 0.96% depreciation in value for the session.

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Thursday’s downturn was due to profit taking in Guaranty Trust Bank, Zenith Bank, Stanbic IBTC, FBNH, Flourmills, Dangote Sugar, Diamond Bank, FCMB, Access Bank and GSK, among others. This left the Year-to-Date loss at 2.10%, while that of market capitalization is down by N245.82bn from its opening level of N11.72tr, representing a 2.10% decline.

Bearish Sectors Indices
Sectoral performance indices for the session were largely bearish, except for the NSE Oil/Gas that closed green at 0.64%. Market breadth remained negative, with decliners outweighing advancers in the ratio of 24:13, just as market activities were down in volume and value by 21.09% and 27.79% respectively to 169.19m shares worth N1.13bn, from previous session’s 214.4m units valued at N1.56bn, driven by, Diamond Bank, Transcorp, Access Bank, FCMB and Zenith Bank.

The best performing stocks were Forte Oil and Union Bank that topped the advancers table, gaining 9.64% and 8.04% respectively, closing at N30.70 and N6.05 each, on the news that Planet Oil Limited is acquiring Femi Otedola’s 75% equity stake and market forces. On the flipside, GSK and Universality Press led the decliners’ side with 10%% and 9.63% respectively to close at N13.05 and N1.97 each, on market forces and trend.

Market Outlook
Being the last trading session of the week, the MACD on a daily time frame has formed a double top, while looking down supports in the ongoing trend and volatility amidst repositioning for 2018 full year earnings season to shape market performance ahead of December inflation data, MPC meeting, presidential election, earnings season and handover. We advise cautious trading and investing ahead of the polls.

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
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
https://investdata.com.ng/2019/01/volatility-may-persist-as-q3-data-assist-investors-fund-managers-rebalance-portfolios/