Market Update for June 5, 2018
Trading activities on the Nigerian Stock Exchange on Tuesday was volatile yet, but positive to record a back-to-back gain, ushering in recovery mode as traders and investors take advantage of low prices to consolidate their positions. They are also reducing their losses in what may seem a bottoming out as market breadth finally turned positive with higher number of advancers at the close of trading for the day.
The increased demand for medium and high cap stocks during the session signals entrance of new market players seeking to capitalize on the subsisting low valuation prevailing now, given the intrinsic value of most companies and their upside potential ahead of the 2019 general elections. Investors are, at last, paying attention to the nation’s upbeat macro-economic indices and better company fundamentals that will drive prices in the nearest future, considering the low prices due to the prolonged correction, profit taking and sell-offs that led to price decline. Ahead of the half-year earnings season, there is the high possibility of equity prices reacting to earnings and liquidity level rising due to the expected implementation of the 2018 budget, not forgetting increased spending during the electioneering campaigns.
The day started out with a pop to the upside at the opening but slowed down in the mid-morning before continuing up at midday, way into the afternoon session, hitting intraday highs of 37,854.92 basis points from a low of 36,947.10bps to close higher and record the second largest gain after February 28, since the peak of the January rally.
Tuesday’s technicals were positive, so we consider it a win for the market as traded volume was relatively low, just as buying pressure stood at 100% and selling volume, 0% on a volume index of 1.07 of the day’s total transactions.
Buying interest reflected on the money flow index at 12.92 points from the previous day’s 6.01 points, which is an indication that funds had started entering the market again. Just as the market is waiting for regulatory and government policies that will trigger new positioning and reduce over dependence on foreign inflow sto drive the market and economy. Also noticeable in the past two sessions is the foreign investors participation in Guaranty Trust Bank, Zenith Bank Access Bank, Nigerian Breweries and Dangote Cement by way of taking position as stocks are cheaper now.
Index and Market Cap
The All Share Index gained 907bps to close at 37,854.92 bps, after opening at 36.947.10 bps, representing a 2.46% growth on a relative low volume that was higher than the previous day’s. Similarly, market capitalisation was up by N328.84bn to close at N13.71 tr from an opening value of N13.38tr, also representing 2.46% value appreciation, which reduced investors’ year-to-date loss. Also noticeable was the fact that the market rebounded to breakout 37,000 psychological line in one trading session to support the seeming bottoming out as we look to mid-week’s session to consolidate this recovery move.
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The day recorded an upturn as result of buying interests in medium and high cap stocks like: Dangote Cement, NB, Guaranty Trust Bank, Zenith Bank, Fidelity Bank, Dangote Flour, Oando, International Brewery, Honeywell, Flour Mills, Dangote Sugar and Access Bank, which impacted positively on the market, reducing the NSE’s Year-to-Date loss to 1.02%; while market capitalisation gain for the period currently stands at N102.72bn, of 0.75% above the year’s opening value.
Bullish Sector Performance
Sectorial performance across broad were largely bullish except for the NSE Oil/Gas that closed lower due to losses suffered by Total Nigeria, which wiped away the impact of the gains by Oando and Eterna on the sector. Other sectors like Banking, Consumer, Insurance and Industrial were helped by GTBank, Zenith Bank, FBNH, Flourmill, Dangote Sugar, Wapic, Mutual Benefits, Lafarge Africa and Dangote Cement that appreciated in value, same as the general market.
Market breadth was positive with increasing number of advancers to outweigh decliners in the ratio of 39:15 to continue two days up market.
Market activities were mixed as volume was up by 8% to 339.68m shares, from the previous day’s 314.44m units, while value decline by 15.2% from N7.03bn to N5.94bn. Transaction volume was boosted by trading in financial services stocks like Access Bank, Guaranty Trust Bank, UBA, Zenith Bank and FBNH which witnessed increased trading to top the activity chart.
The best performing stocks at the end of trading session were Oando and International Brewery that topped the advancers’ table, gaining 9.8% and 7.7% respectively to close at N6.70 and N42.00 each. This was as a result of market forces and low price attraction.
On the flip side, Consolidated Hallmark Insurance and Royal Exchange Assurance were the worst performing, losing 6.7% and 5.9% respectively to close at N0.28 and N0.32 each on profit taking and market forces.
Market Outlook
We expect trend to be sustain today as traders and investors take more position due to low prices, while volatility continues, as players rebalance their portfolios ahead of March full-year accounts, especially as equities become cheaper with higher yields. Investors should review their position in line with their investment goals and take action as events as it unfolds in the global and domestic environment.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season were less earnings are released ahead of march full year earnings release and Q2 interim dividend payment are expected in the market arena very soon.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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