Expect Volatility, Mixed Performance On Continued Profit Booking From Rally

Market Update for the week ended April 18 and Outlook for April 23-26
The Nigerian Stock Exchange (NSE) in the past week had a positive outing, halting five consecutive weeks of decline on the back of seemingly positive economic data released by the National Bureau of Statistics (NBS) and inflow of mixed Q1 earnings reports to the market in the period under review. The reports from the financial services and consumer goods sectors so far are weak, just in line with Investdata’s expectations, but given the prolonged decline in equity prices, the scorecards could be catalysts if the ongoing buying interest is sustained next week as more Q1 numbers hit the market.

Meanwhile, the Central Bank of Nigeria (CBN) is easing gradually, while inflation rate is lowering, as revealed through the Consumer Price Index (CPI), a measure of the average change in the general price level of all items, which declined Year-on-Year in the month of February, from 11.31% to 11.25%. This represents the third consecutive monthly decline in Nigeria’s Headline inflation rate, jointly impacted by the reduction in both core (all items less farm produce) and food (farm produce) price sub-indexes.
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Movement Of NSEASI
The four trading days of last week ahead due to the Easter holiday recorded three sessions of positive performance driven by the earnings reports from the big banks: Guaranty Trust Bank, Zenith Bank, and Access Bank, as well as Africa Prudential, United Capital and Unilever Nigeria that came mixed and even weak.
The recovery trend continued after Monday’s slowdown on strong momentum, trading above the 20-Day Moving Average, despite profit bookings in the last trading session of the week.
The benchmark NSE All-Share index lost 0.22% on Monday, but turned positive on Tuesday and thereafter consolidated on Wednesday and Thursday, when it notched 0.46%, 0, 78% and 0.53% on the strength of bargain hunting for undervalued stocks. This brought the week’s total gain for the week to 1.78%, thereby reversing previous week’s 0.19% loss.

In the period under review, kobo stocks dominated the advancers’ table as demand for blue-chip stocks were just kicking off ahead of the expected Q1 scorecards. The recovery was sustained due to low stock valuations, despite price adjustments for dividends declared. The renewed demand for stocks was evidenced in the sector indexes that closed positive, except the NSE Oil/Gas index that lost 2.22%, while the NSE Consumer index led the advancers’ side with 5.20%, followed by the NSE Insurance and Banking indices with 2.44% and 2.07% respectively.
The energy behind the week’s performance was weak, but up marginal as revealed by money flow index at 35.55 basis points, compared to 31.40bps in the previous week, indicating that funds are gradually entering the market. Just as buying volume stood at 93% for the period under review.

NSEASI Weekly Time Frame
The NSE All-Share index during the week rallied on a low traded volume while at the same time forming a double bottom, signaling a high possibility of trend continuation, on improved positive sentiments, amidst the side trending Money Flow index. Also noteworthy is the fact that the benchmark NSEASI is trading above its 20-Day Moving Average, to breakout the psychological line of 30,000.

Bullish Sectors Indices
The sectoral performance index was largely bullish, except for the NSE Oil/Gas that closed lower, while market breadth was flat with advancers equaling decliners in the ratio of 33:33, thereby reversing previous week’s down market. Volume and value for the period declined by 44.14% and 25.10% respectively to 988.96m shares worth N11.43bn, compared to previous week’s 1.77bn units valued N15.26bn. The uptrend confirms the impact of bargain hunting and portfolio repositioning ahead of Q1 earnings season and economic data expectations.
The statement that the stock market is the barometer for measuring economic wellbeing of any nation will be tested when the NBS publishes the Q1 GDP, given that the corporate earnings already released have given insights into the nation performed between January and March, despite expansion recorded in the Purchasing Managers’ Index (PMI).

The best-performing stocks for the week were Chams and First Aluminum, which led the advancers’ table with 28.57% and 28.13% gains respectively, closing at N0.36 and N0.41 per share on market forces. On the other hand, ABC Transport and Royal Exchange Assurance that suffered losses of 17.50% and 12% respectively, closing at N0.33 and N0.22, as investors are watching.
During the week also, the prices of Unilever Nigeria, Chams, Fidelity Bank and Fidson Healthcare were adjusted for a dividend of N2.45, five kobo, 25 kobo, and 35 kobo respectively proposed by their directors.
Also, investors are already anticipating the bulk of 2019Q1 company earnings reports that will tell the full story of how the economy performed between January and March.

Market Outlook
We expect the mixed performance to continue this week due to profit booking from the rally witnessed last week. We must not gloss over the reality that there is currently no positive trigger to sustain the recent market resurgence. That notwithstanding, we would not overlook the possibility of a bargain-hunting motive supporting positive performance, especially with many fundamentally sound stocks remaining underpriced.

With the prices of major blue chips continuing to drop in recent weeks, we expect speculative trading to shape the market’s direction this week, despite the seeming negative outlook.
The sustained volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on the political space and post-election market dynamics. Investors should review their positions in line with their investment goals, the strength of 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 and 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.
We appreciate all the participants and facilitators that made our Port Harcourt Chart Summit a success. Believing all the strategies discussed will impact positively on their trading if implemented.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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Tel: 08028164085, 08032055467
https://investdata.com.ng/2019/04/expect-mixed-performance-may-continue-owing-to-profit-booking-from-rally/