NGSE Indices Stay Red In March, As Low Confidence Blight 2018 Audited Earnings Reports

March market Roundup and Outlook for April
As many of us would be aware and as we mentioned at the beginning of March, we noted the fact that the month is the peak of earnings reporting season, especially given that more companies, particularly the banks and indeed financial services provided, as well as almost all multinationals have December 31 as their year-end. We also noted in one of our daily updates in the past that this fact makes the period between February and March end every year the most important period for investors, traders, share prices and indeed the Nigerian equity market.

This can be seen in the market performance of the Nigerian Stock Exchange (NSE) year-to-date, at -1.24%; month-to-date, -2.14% and even week-to-date, -0.31%, followed the lingering poor investor confidence. This has defied the seemingly high dividend payout and yield in the midst of mixed earnings reports by most companies which reflect the weak economic fundamentals and reality of the 2018 financial year, a pre-election year. Not that whatever little confidence the market managed to sustained was further dampened by the conduct of the 2019 general elections, which many say came far below expected performance standards. It was made worse by the fact that there were inconclusive governorship and National Assembly elections in five of the 29 states where elections held. Indeed, the governorship election was conducted in parts of Adamawa State for the third time this year, last Thursday, a situation that has never been witnessed in the country’s democracy.

The market’s reaction to this has been seen in the way smart money took to flight, as gauged through the Money Flow Index, forcing the NSE All-Share index to break down its uptrend line on continued selloffs. Besides the low investor confidence, there is also the lack of an economic direction, as investors await government’s economic policy and reforms to needed to stimulate growth and complement the recent rate cut by the Central Bank of Nigeria (READ MORE).
The market also did not react to the 11.31% February inflation rate, which dropped from 11.37% in January, or the expansion in manufacturing sector’s Purchasing Managers Index to 57.4 points in March, from 57.1 points in February.

The market’s bearish nature during the period reversed the 3.81% gain in February, as the NSE All-Share index fell by 2.14% in March, after 14 sessions of bear market and seven up sessions during the month. Last Friday, March 29, 2019, the NSE index closed positive at 31,041.42 basis points. The index touched a peak of 32, 251.89bps and low of 30,770.80bps in March, after opening at 31,721.76bps on a low traded volume, compared to the previous month.

Also, market capitalisation for March closed at N11.67tr, from N11.83tr, representing 1.35% decline, despite the listing of Lafarge Africa’s 7.43bn shares rights issue that was 100% subscribed (READ MORE).
Market technicals for the month were negative and weak, with volume traded lower than that of February in the midst of negative breadth and high selling pressure, as revealed by Investdata’s monthly Sentiment Report, showing sell position of 82% and buy volume at 18%. Monthly total transaction volume index was 0.94, just as momentum behind the market’s performance for the month were weak as shown by money flow index at 28.01 points, from previous month’s 45.10ps. This is an indication that funds left the market, following the persistent selloff in midst of earnings reporting season.
Market breadth for the month was negative and weak as decliners outnumbered advancers in the ratio of 62:18. Transacted volume for the period fell by 16.75% to 6.56bn shares, as against the 7.88bn units in February.

Sector Performance
All sectorial indices closed red, except for the NSE ASeM that remained green at 0.81%, the worst of which was insurance index which lost 5.47%.


Best Performing Stock
The poor reactions to corporate earnings in March reflected in the number of stocks that closed higher, with the best performing stocks at over 20% gain for the month being McNichols, on the impact of its proposed five kobo dividend, chalking 37.25%. C& I Leasing followed, irrespective of its recent share reconstruction that lifted its share price to N9.12 each, before falling to N6.61 and thereafter retracing up by gaining 20.88%. Next was Eterna with 20.45% lift, impacted by full year earnings expectation (SEE TABLE BELOW).
It is adviceable that you take advantage of these high yields to position in fundamentally sound stocks, ahead of the 2019 first quarter numbers expected to hit the exchange in April.


Worst Laggards
PZ Cussons was the worst laggard, shedding 27.14% in a month when it presented its third quarter earnings report; followed by Africa Prudential’s 21.49% slide; while Jaiz Bank lost one-fifth of its opening price for the period.


Technical View


In February, the composite NSEASI broke out the downtrend line on a high buying interest, but pulled back in March on low traded volume and negative sentiments due to noticeable indecision among traders. There was also the effect of the prevailing low liquidity as reflected in the money flow index at 28.01 points, down from 45.10 points in the prior month. Meanwhile, the NSE index continues to trade below its 20-Day Moving Average on a monthly time frame, while MACD remains bearish.

With the last minutes influx of 2018 full year audited financials and expected 2019 first quarter earnings reports in the new month, portfolio repositioning and rebalancing among traders and investors are expected as traders interpret and analyse the numbers together with the 2019Q1 numbers. This will give an insight into what to expect from the companies in the cause of 2019.
Expectations For April/May
In the Nigerian stock market, the month of April is the extension of earnings reporting season due to expected quarterly results. This is why traders and investors should be in the market to benefit from the corporate actions already pouring in.

Know that the earnings season momentum, as well as liquidity, determine market movement/direction, as such, we should expect:
•The Federal Government’s economic data and reforms agenda, or a retooling of existing ones to drive growth and development.
•Market oscillation due to profit taking and disappointments with some corporate results released.
•Gradual inflow of funds into the equity market, as a reaction to the rate cut by the CBN, besides fluctuations, as foreign and institutional investors return or exit the market. This oscillation is expected to create entry and exit opportunities.
•More quarterly results and few 2018 full year audited earnings by late filers. These earnings from blue-chip companies are likely to strengthen fundamentals, depending on the quality and value of their numbers.
•As investors reshuffle their portfolios to move into equities with strong fundamentals, high Dividend Yield and possible bonus issues, we should expect stock prices to gravitate upward, if their numbers beat expectation.
•Expect this up and down to continue into the last month of 2019Q2, amidst profit taking to reposition for Q3, even as we expect liquidity to improve.
•Market outlook for the month of April and May remains mixed, but investors should invest wisely, using dates, bids, offers and volume when taking investment decision .
•Managing risk and protecting capital at this point is very important, as it will help determine when to buy or sell, by watching the stocks and the market, using technical analysis, aided by investdata buy & sell signal.
•Let numbers emanating from companies and the markdown dates guide you into profitable investment.

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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/2019/03/ngse-indices-stay-red-in-march-as-low-confidence-blight-2018-audited-earnings-reports/