Expect Portfolio Rebalancing On NGSE, As Investors Digest Emerging Q3 Reports

Expect Portfolio Rebalancing On NGSE, As Investors Digest Emerging Q3 Reports


Post Views: 470 MARKET UPDATE FOR OCTOBER 17, 2018 Volatility on the Nigeria Stock Exchange (NSE) continued at midweek despite the onset of Q3 earning...

Volatility May Persist On NGSE, As Investors Reposition Ahead Of General Elections
Volatility Still, As Investors Review Q3 Numbers, Rebalance Portfolios, Ahead 2019 Polls
NGSE Index Sustains Rebound On Strong Buying Pressure, As Investors Wait To Confirm Recovery


Volatility on the Nigeria Stock Exchange (NSE) continued at midweek despite the onset of Q3 earnings reporting season with trading indicators oscillating to reverse previous day’s gains as the composite index closed lower on profit booking and selloffs in high cap stocks that pulled the market down.
Trading for the day started out with a quick move to the downside at the opening session, followed by an orderly sell-off into the afternoon when it touched intraday lows of 32,413.90 basis points from highs of 32,722.18bps to retest the recent secondary support level. However, it rallied back marginally in the last few minutes to finish the session at 32,437.35bps on a lower volume of transaction.
As it is now, the market index has gone back to rest on the short Moving Average of seven and 21 days after it had earlier broken out. A breakdown of 7DMA could confirm 15 months lower lows, but the expected company fundamentals that would be made visible through the quarterly earnings which have started rolling in could support an uptrend, if the numbers beat expectations. Already, companies that have released their Q3 numbers include UBA, Guaranty Trust Bank and Lafarge Africa. We note that the numbers have been mixed as performance of the financial service providers were boosted by trading and other incomes, rather than their traditional interest income, while Lafarge posted loss.
Market technicals at midweek were negative and mixed as volume traded was relatively low on a negative market breadth in the midst of high selling pressure as revealed by Investdata’s Daily Sentiment Report, indicating a ‘sell’ volume of 94% and buy position of 6%. The volume index for the day’s total transactions was 1.18.
Energy behind the day’s market performance was weak as reported numbers came mixed, reflecting in the money flow index at 40.55bps, from previous day’s 47.70bps, an indication that funds left some stocks as traders took profit in the face of low liquidity in the market.

Index and Market Cap
The benchmark NSE All Share Index shed 284.83bps, closing at 32,437.35bps, after opening at 32,722.18bps, representing a 0.87% decline, just as market capitalization shed N103.98bn, closing at N11.83tr, from N11.95tr, representing a 0.87%, value loss.

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The day’s downturn resulted from selloffs and profit taking in medium and high cap stocks like: Dangote Cement, Nigerian Breweries, UBA, Fidelity Bank, Access Bank, Zenith Bank, Forte Oil, FBNH and UACN. This impacted negatively on Year-to-Date negative returns, which increased to 15.18%, and market capitalization to N1.76tr, representing a 13.09% drop, from the opening value.

Bearish Sector Performance
Midweek sectorial performance was largely bearish, except for the NSE Insurance that closed higher. Market breadth was negative as decliners offset advancers in the ratio of 22:11, to halt the previous up market.
Market transactions in volume and value were down by 63.63% and 31.12% respectively to 240.76m shares worth N3.66bn, from previous day’s 662.02m units, valued at N5.31bn. Activities were boosted by trading in financial services stocks like: Zenith Bank, UBA, Fidelity Bank, Sterling Bank and Guaranty Trust Bank
Sunu Assurance and Continental Reinsurance were the best performing stocks, chalking 10% and 9.63% respectively to close at N0.22 and N1.48 per share, on the impact of market forces and low price attraction. On the flip side, Pharma Decko and UACN lost 10% and 9.09% respectively, closing at N1.71 and N10 each on profit booking and market forces.

Market Outlook
Expect the oscillating trend to continue as more companies present their numbers in the coming days, amidst increased bargain hunting activities, while volatility and profit taking continue, if the numbers beat market and analysts forecast.
The much anticipated Q3 earnings reports would assist investors and fund managers rebalance their portfolios, while watching the political space and analysing the actual numbers that will give insights into expectations for Q3 GDP and full year company earnings power. These are likely to drive prices north, or south, while determining market direction before or after Presidential Election.
Investors should review their positions in line with 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 volatile amidst mixed company, economic and market fundamental.

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