Earnings Reports May Support NGSE, As Indicators Turn Flat

Market Update For February 26, 2019

Nigeria’s stock market rally was halted on Tuesday, reversing previous day’s gain after the benchmark index closed lower on a relatively high traded volume that was above recent average market volume.

This resulted from the fact that smart money having pushed the market up are taking profit. What happens in the coming days will show whether Tuesday’s slide by the NSE All-Share index is due to investors reactions to the official results of last Saturday’s presidential and National Assembly election announced so far by the Independent National Electoral Commission (INEC).

We note forecasts of the likely emergence of the main opposition Peoples Democratic Party (PDP) at the polls, which has so far been proved wrong by the emerging numbers.This was revealed by the category of stocks that suffered losses at the end of the day’s trading session.

The NSE index opened the day’s trading with a marginal upside movement in the morning, which continued into midday as INEC announced more results from different states in favour of the ruling party. This may have triggered selloffs after the index touched intraday highs of 32,745.92 basis point from lows of 32,441.42bps, before retracing up slightly to close the day red at 32,473.82bps on a flat market breadth.

This pullback may not last however, due to the ongoing earnings season that just kicked off, with more companies notifying the exchange of their board meetings and closed periods. The month of March, which is normally the peak of the earnings reporting season for December year end accounts, begins Friday. Major bellwether stocks yet to present their audited December 31, 2018 figures include: Dangote Cement and it’s sister companies, Guaranty Trust Bank and Nestle Nigeria, among others.

The dividend payout and yield of financial services providers that have so far presented their reports like Zenith Bank, United Capital and Africa Prudential are expected to support their share prices.

Market technicals on Tuesday were negative and mixed as volume traded were higher than previous session in the midst of flat breadth and high selling pressure. This was revealed by Investdata’s Daily Sentiment Report, showing a sell position of 89% and buy volume of 11% on a daily transaction volume index for the day at 0.89.

Momentum behind the day’s market performance was down, reflecting the sell market as shown by money flow index at 87points, down from previous day’s 92.44bps, indicating that funds left the some stocks.

Index and Market Cap
At the end of the session, the composite NSEASI lost 226.30bps, closing at 32,473.82bps, after opening at 32,700.12bps, representing a 0.69% decline. Market capitalization lost N84.39bn to close at N12.11tr, from the opening value of N12.19tr, representing a 0.69% depreciation.

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The session downturn followed profit taking in medium and high cap stocks like:Nestle, Guaranty Trust Bank, Zenith Bank, UBA, FBNH and Dangote Sugar, among others. This impacted negatively on Year-to-Date gains which contracted to 3.32%, while market capitalization gain dropped to N300.39bn, from the year’s opening level of N11.72tr, representing a 3.32% growth.

Mixed Sectoral Indices
All sectoral indices were largely bullish, except for NSE Consumer Goods and Banking that closed 1.57% and 1.18% red respectively. Market breadth was flat as advancers slightly outnumbered decliners in the ratio of 21:20.

Market transaction were however mixed as volume was up by 46.57% to 322.18m shares, as against the previous day’s 219.81m units, while value dropped by 56.14% to N2.43bn, from previous value of N5.55bn. This volume was driven by financial services stocks like: Sunu Assurance, Access Bank, Diamond Bank, UBA and Guaranty Trust Bank.

The best performing stocks for the day were Africa Prudential and Oando that topped the advancers table, gaining 10% and 9.85% respectively to close at N4.84 and N7.25 per share on dividend declaration and expected earnings report. The flipside was led by NPF Microfinance and Union Bank, which shed 9.70%% and 8.28% respectively to close at N1.49 and N6.65 each, on profit taking and market forces.

Market Outlook
We expect more earnings reports. This will expectedly have positive influence on the market if the numbers and rewards beat expectations, despite profit taking and volatility that will continue. 

Investors and traders also should continue their repositioning for the 2019 dividend declaration season and post-election rally expected to shape market performance in the interim. We advise cautious trading and investingwhile positioning in fundamentally sound equities.

Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on earnings reports, but 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/2019/02/earnings-reports-may-support-ngse-as-indicators-turn-flat/