Rescheduled Polls: Profit Taking On NGSE, Amidst Repositioning For Dividend, Post-Election

Market Update for February 18
It was a disappointing and difficult session, although foretold, on Nigerian Stock Exchange on Monday following apprehensions as rescheduling of the Presidential and National Assembly elections triggered the long awaited pullback and profit taking after the market had rallied for two weeks that reversed the January down market, which had defied the political tension.

The Presidential and National Assembly elections were postponed just hours to their commencement across the country by the Independent National Electoral Commission (INEC) citing logistic reasons to the disappointment of many Nigerians. The situation also did not go down well with investors, especially as it seemingly confirmed long standing fears of uncertainties around the elections, just as it signaled the lack of preparedness by the umpire and the government. There have also been worries about the economic cost implication of the postponement, besides the huge budgetary allocations for the purpose over the past four years.

NSE’s All-Share Index started out trading on a big gap down in the morning session, plunging deeper between mid-morning and midday, when it fell to 31,824.22 basis points, before walking its way back up gradually in the afternoon when it closed at 32,190.07bps. Traded volume was low, revealing the wait-and-see attitude of market players, added to the dissatisfaction over the dividend declared so far which have come far below market and analysts expectations. This was especially true of the Transnational Corporation of Nigeria (transcorp), which recommended three kobo dividend, despite its impressive numbers, as its management could be building its reserves by retaining more of its earnings, being one of the NSE’s growth stocks (READ MORE).

The corporate earnings released so far have already given insights into what is likely to come from companies in the consumer goods, industrial goods, conglomerates and services subsector, at a time of stiffening competition for the reduced disposable income in the economy. Already, the reduction in the losing momentum during the session is a indication that some investors have taken advantage of the pullback to buy blue chip stocks.

Market technicals were negative and mixed, with traded volume lower than previous session’s in the midst of a negativebreadth and mixed sentiment as revealed by Investdata’s Daily Sentiment Report, showing a selling volume of 60% and buying position of 40%. Daily transaction volume index for the day stood at 0.66.

The energy behind the day’s market performance was high, despite the down market as shown by money flow index at 78.31points, from previous day’s 76.88bps, indicating that funds are moving around stocks.

Index and Market Cap
At the end of Monday’s trading, the All Share index lost 525.13bps, closing at 32,190.07bps after opening at 32,715.20bps, representing a 1.61% decline, while market capitalization shed N195.84bn, closing at N12tr, from the opening value of N12.2tr. This represented a 1.61% loss in value.

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Profit taking was largely driven by Dangote Cement, Nigerian Breweries (READ MORE), Unilever, Guaranty Trust Bank, CCNN, UBA, Access Bank, Diamond Bank and Transcorp, among others. This impacted negatively on Year-to-Date, reducing it to 2.24%, while gain in market capitalization YTD dropped to N187 84bn from the year’s opening level of N11.72tr, representing a 2.24% growth.

Bearish Sectors Indices
All the sectoral indexes were bearish, with NSE Banking and Oil/Gas leading the decline, while market breadth was negative with decliners outnumbering advance in the ratio of 37:12.
Market activities were down in volume and value by 71.13% and 48.15% respectively to 233.42m shares worth N3.36bn, from previous day’s 808.65m units valued at N6.49bn. Transaction volume was propelled by Access Bank, Chams, UBA, Zenith Bank and Guaranty Trust Bank.

Top advancers for the session were Presco and Beta Glass, which chalked 10% and 9.27% respectively to close at N72.60 and N79 respectively on market forces and earnings expectations; while the flipside was led by Transcorp and C & I Leasing after shedding 9.94% and 9.82% respectively to close at N1.54 and N6.61 each, on profit booking and market forces.

Market Outlook
With the postponement of the all-important Presidential and National Assembly polls, profit taking and volatility will continue, as investors and traders reposition for 2019 dividend declaration season and post-election rally which are expected to shape market performance in the interim. We advise cautious trading and investing while positioning in fundamentally sound equities.We expect early filers like United Capital, Africa Prudential and Forte Oil to hit the market with their numbers any moment from now.

Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on political space and ahead of January inflation data, which is another factor 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
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https://investdata.com.ng/2019/02/rescheduled-polls-profit-taking-amidst-repositioning-for-dividend-post-election/