Volatility, Profit Booking Linger, As Investors Bet On Nigeria’s Presidential Poll

Volatility, Profit Booking Linger, As Investors Bet On Nigeria’s Presidential Poll


Post Views: 258 Market Update for February 4 The nation’s equity market on Monday continued its volatility, closing higher on positive sentiments for ...

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Market Update for February 4
The nation’s equity market on Monday continued its volatility, closing higher on positive sentiments for blue chip stocks as investors positioned ahead for possible pre and post-election rally just 12 days to the much awaited February 16 Presidential polls that will determine the fate of Nigeria as a nation in the next four years.
The Nigerian Stock Exchange (NSE) benchmark All-Share index opened for trading on the upside in the morning and rose all-day, before closing above its opening level, forming an inverteds head and shoulder chart pattern that supports uptrend, depending on the interplay between market forces. The index touched intraday high of 30,754.09 basis points from a low of 30,636.36bps before finishing at the session at 30,745.05bps on a low traded volume and high buying pressure.
With the earnings reporting season expected to kick off this month and early filers approach the market with their numbers, many companies have notified the NSE of their board meetings to consider and approval 2018 financial statement. Some banks have submitted their score-cards to their primary regulator- the Central Bank of Nigeria (CBN) for review and approval, prior to presentation to the market. These are likely to influence investing public demand for stocks, especially the dividend paying companies with history of growing their payout on dividend equalization policy, as well as those with robust Q3 Dividend Yields.
The global markets and economic sentiment in January had a big rebound in expectation of that the trade dispute between the U.S and China, the world’s two largest economies will be resolved, oil price will recover and there will be a slowdown in U.S rate normalization. These are likely to have positive impact on an emerging markets going forward.
The economic activities in the manufacturing sector continued to expand in January, although it came slower as expected. In the month of January, where all we heard was the story of slowdown, January effect, political uncertainty and others, the nation’s Purchasing Managers’ Index, as released by CBN showed that activities in Nigeria’s manufacturing sector dropped to 58.83 points, from 61.2 point in December.
Equity market technicals on Monday were positive, although mixed as transaction volume came lower, when compared to the previous session in the midst of a negative breadth and strong buying interest for stocks as revealed by Investdata’s Daily Sentiment Report, showing buy volume of 92% and 8% sell position. Volume index for the day was 0.51.
The energy behind the day’s market performance was slightly down, despite the up market as shown by the 53.92bps money flow index, from previous day’s 55.08bps, an indication that funds left some stocks and entered some others.

Index and Market Cap
At the close of Monday’s trading, the All Share index gained 108.69bps, closing at 30,745.05bps having opened at 30,636.36bps, representing 0.35% growth; while market capitalization climbed N40.53bn up, closing at N11.46tr from the opening value of N11.42tr, representing a 0.35% value gain.
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Monday’s upturn was attributed to buying interest in banking and consumer goods stocks like Nigerian Breweries, Guaranty Trust Bank, Access Bank, UBA, Stanbic IBTC and FBNH, among others. This impacted positively on Year-to-Date loss, reducing it to 2.18%, while the loss in market capitalization reduce to N321.54bn, from the year’s opening level of N11.72tr, representing a 2.18% decline.

Mixed Sectors Indices
The sectoral indices performance was largely bullish, except for the NSE Oil/Gas that closed in the red due to profit taking in Forte Oil, Oando and Total Nigeria, while market breadth was negative with decliners outnumbering advancers in the ratio of 20:17.
Market activities were equally down in volume and value by 32.21% and 76.95%, as 183.67m shares changed hands for N1.04bn, from previous day’s 270.94m units valued at N4.42bn. Transaction volume was driven by financial services and conglomerates stocks like: Fidelity Bank, Transcorp, Diamond Bank, Zenith Bank and UBA.
Ikeja Hotel and Redstar Express were the best performing stocks for the day, gaining 10% each to close at N1.65 and N5.50 respectively on market forces and impressive Q3 numbers, The flipside was led by Champion Breweries and Academy Press, as they shed 10% and 8.89% respectively to close at N1.62 and N0.41 each, on the back of their unimpressive earnings report and market forces.

Market Outlook
We expect the volatility and profit booking to continue, as elections dates draw closer heating up the political environment, a situation that continue to weigh down the bourse as investors and traders reposition for 2019 dividend declaration season that will shape market performance after the elections. We advise cautious trading and investing while positioning in fundamentally sound equities.
Volatility will also persist as investors and fund managers reposition their portfolios, with eyes fixed on political space and ahead of full year company earnings position and post-election market dynamics. These are 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

Tel: 08028164085, 08032055467