Post Views: 129 Market Update for April 11 Thursday’s trading on the Nigerian Stock Exchange (NSE) was another very volatile session which closed high...
Market Update for April 11
Thursday’s trading on the Nigerian Stock Exchange (NSE) was another very volatile session which closed higher and extended its positive outing for the second day on improved buying interests in financial and industrial sector stocks, ahead of the Q1 earnings season, despite the weak 2018 full-year corporate numbers presented by many listed companies. Many companies are expected to release their Q1 scorecards next week, especially the major banks, which are likely to set the tone and serve as a catalyst for the market’s rebound, given that consumer goods manufacturers continue to witness “earnings recession.”
It may be too early yet to determine whether the gains recorded on Wednesday and Thursday are signs that the weak 2018 earnings that arose from weak economic fundamentals and pre-election year uncertainties, most of which set the market back considerably, are subsiding. It may also just be early safe bets by investors and traders positioning ahead of Q1 numbers that they expect will give insights into where the companies are headed in the new financial year, after their 2018 outings.
Investdata research believes that companies with hot numbers in the previous year are likely to improve on their earnings, a situation that will more attract attention to their stocks, as expected under ordinary, in a stable economic environment, where improved earnings drive the market and support economic activities.
The general market sentiment on future corporate earnings was eroded at the end of 2018, a situation that will continue through 2019, should the government fail to articulate economic policy and reforms capable of stimulating growth. As has been repeated, Nigeria needs growth commensurate with its potentials to overcome overwhelming poverty, following which government must create an environment that will help create more jobs at a faster rate than population growth, through labour-intensive sectors of the economy like the textile sector. The power bottleneck must be addressed in practical terms, rather than the sloganeering antics of the past.
Also, it is important to note that stocks have not recovered from the post-election losses from the post-election outcome.
The NSE index opened Thursday on a slight downside, but rebounded at the mid-morning, a situation that was sustained throughout the session, after touching intraday high of 29,347.62 basis points, from a low of 29,172.35bps, to close the session above its opening figure.
Market technicals were positive but mixed as volume traded was lower than previous day’s in the midst of positive breadth and sentiment as revealed by Investdata’s daily sentiment report that shows a 100% buy volume of the total daily transaction volume index of 0.58.
The forces behind the day’s market performance were very weak and flat as shown by Money Flow Index of 16.75 points, from previous day’s 16.96bps, indicating a low inflow to the market, despite the seeming increase in demand for stocks.
Index and Market Cap
The benchmark NSE All-Share Index gained a total of 154.20bps, closing at 29,347.62bps, after opening at 29,202.54bps, representing a 0.53% rise, while market capitalization climbed N57.92bn to N11.02tr, from its opening value of N10.97tr, also representing 0.53% value gain.
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The day’s upturn was driven by bargain hunters taking position in banking, insurance and industrial stocks like Stanbic IBTC, Guaranty Trust Bank, FBNH Holding, Lafarge Africa, FCMB, UBA, Access Bank, and NEM Insurance. This impacted positively on the Year-to-Date loss, reducing marginally to 6.63%, just as market capitalization drop reduced to N697.53bn, or 5.85%, from the year’s opening level of N11.72tr.
Mixed Sector Indices
The sectoral performance indexes for the day were largely bullish, except for the NSE Consumer goods that closed lower, while others closed green, led by the insurance and banking indexes with 1.92% and 1.19% respectively. Market breadth was positive as advancers outweighed decliners in the ratio of 15:7.
Market activities in volume and value were down by 53.45% and 30.04% respectively to 224.03m shares worth N2.01bn, as against previous day’s 481.63m units valued at N2.88bn. Volume was driven by financial services stocks like Zenith Bank, Guaranty Trust Bank, Stanbic IBTC, FBNH, and Access Bank.
NEM Insurance and Niger Insurance were the best-performing stocks for the day, with gains of 10% each, closing at N2.20 and N0.22 per share on market forces, while Ikeja Hotels and ABC Transport lost 9.76% and 8.33% respectively, closing at N1.85 and N0.44 respectively, on profit taking.
Being the last trading day of the week, expect a mixed performance depending on market forces as traders speculate ahead of Q1 numbers and inflation data for March, which will give direction into how this year could turn out after seeing the weak 2018 financials.
Investors look to government’s policy direction as the market faces low liquidity problems in the ongoing earnings reporting season, vis-à-vis market and economic fundamentals.
Given the drop in the prices of major blue chips in recent times, creating entry opportunities, we expect speculative trading to shape the market direction going forward.
The volatility witnessed from last week until Tuesday was driven by traders and investors repositioning ahead of dividend declaration by major listed companies.
The ongoing volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on political space and ongoing full year company earnings position and post-election market dynamics. Investors should review their positions in line with their investment goals, the 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 to 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.
Meanwhile, we greatly appreciate participants in the Abuja Invest 2019 Post-Election Bulls & Bears held on Saturday, March 23.
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The workshop is scheduled as follows
FEE: N10, 000
DATE: April 13. 2019
TIME: 10am – 4.00pm
VENUE: Emerald Hotel, 193, Aba Road Rumuola, Port Harcourt, Rivers State.
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CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467