Volatility, Slower Selloffs, As Investors Bet On Awaited 2018 Numbers, Dividends

Market Update for March 12
The losing momentum on the Nigerian Stock Exchange on Tuesday worsened with the composite All-Share index consolidating five consecutive losing sessions. The effect of the loss swung the market’s year to date position into negative territory after five weeks of an initial uptrend.

This recent pullbacks were attributed to low liquidity, mixed earnings and outcome of the just concluded general elections, which observers and analysts say have come below expectation. Chief among pointers to support their claim is that the governorship elections in all of six out of 29 states were declared inconclusive. The Independent National Electoral Commission (INEC) has therefore fixed march 23, 2019 to conclude the election in the affected states. For many also, the true confirmation of their fears over the poor management of the 2019 election will be how many of the elections conducted are contested in court and the outcome of such suits.

Recall that the prevailing negative sentiments started again after the 2018 lull situation that extended to early January, but reversed on inflow from smart money that took position ahead of the presidential polls, which outcome was against their expectation. This triggered their quick exit as reflected in the average traded volume and money flow index that have been declining since the re-election of President Muhammadu Buhari, despite the ongoing earnings season.

One cannot also, ignores the expiration of Central Bank of Nigeria Governor, Godwin Emefiele on June 3, following investors are looking who the replacement could likely beach.
The NSE index started the day trading ona gap downin the morning, which was sustained throughout the session to finally finishing the day lower on a low traded volume after touching intraday lows of 31,267.99basis points, from highs of 31, 645.24bps but retraced up marginally to close at 31,313.36bps.

Market technicals for the day were negative and mixed, as volume traded was low despite being higher than Monday’s. There was also negative breadth and high selling pressure, as revealed by Investdata’s Daily Sentiment Report, showing a sell volume of 88% and buy position of 12% on a total daily transaction volume index at 0.63.

The momentum behind the day’s market performance was down sharply to reflect the high selloffs during the session as shown by the money flow index at 28.04points, from previous day’s 37.46bps, indicating that more funds are leaving the market due to weak economic and market fundamentals.

Index and Market Cap
The NSE benchmark All Share index for the day lost 323.30 basis points to close at 31,313.36bps from 31, 636.66bps, representing a 1.02% decline; while market capitalization shed N120.56bn, closing at N11.68tr, from an opening value of N11.80tr, also representing a 1.02% depreciation of value.

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The downturn for day was impacted by selloffs in: 11 Plc, Guaranty Trust Bank, Zenith Bank, NASCON Allied, PZ Cussons Ngeria, Dangote Sugar, Dangote Flour, International Breweries, Access Bank, UBA, Fidelity Bank and FCMB, among others. This impacted negatively on Year-to-Date returns which turned red at0.37%, while market capitalization stoodN461.39bn from the year’s opening level of N11.72tr, representing a 0.37% decline in value also.

Bearish Sector Indices
The sectoral performance indexes were all in the red, except for the NSE Industrial good that gained marginally on the strength of Lafarge Africa appreciation after the conclusion of it rights issue, just as market breadth remain negative as decliners outnumbered advancers in the ratio of 29:8.

Market activities were however up in volume and value terms by 60.55% and 13.31% respectively to 219.37m shares worth N2.93bn, compared to the 128.38m units value at N2.39bn. Volume was driven by financial services stocks like: FBNH, Zenith Bank, UBA, as well as Diamond Bank, Access Bank two competitors that are billed to complete their ongoing business combination on April 1.

The best performing stocks for the session were Law Union & Rock Insurance and UACNProperty, which chalked 7.69% and 7.14% respectively to close at N0.56 and N1.95 per share, purely on market sentiments and forces. On the flipside, International Brewery and AG Leventisled afterlosing 9.92%% and 8.83% respectively to close at N24.05 and N0.31 each, on profit taking and market forces.

Market Outlook
With the expectation of more 2018 financials, the selloff is likely to slowdown while volatility may continue, as market players adopt the wait-and-see attitude in the face of repositioning for the ongoing 2019 dividend declaration season and relative peace post-general elections to shape market performance in the interim.

We advise cautious trading and investing while 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 also that investors should 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/2019/03/volatility-slower-selloffs-as-investors-bet-on-awaited-2018-numbers-dividends/