All Eyes On Q2 Earnings, Despite Mounting Anxiety Ahead Of 2019

Market Update for July 12, 2018

The current trading pattern on the Nigerian Stock Exchange is an indication of confidence crisis ahead of the 2019 general elections as shown in the recent dance of shame in Ekiti State ahead of Saturday’s governorship election. The ugly incidents have continued to trigger fear among investors, especially those considered as hot money, joined by some local investors running for safety of their capital.
As things are now and with the prevailing market pattern, the expected second quarter earnings season that kicks off next week and June inflation data scheduled for release may not make meaningful impact on the indicators, despite the prevailing low prices.
Remember, that first quarter earnings performance was mixed, with some blue-chip companies beating market expectations and estimates. In Q1 we saw the impact of the lack of economic direction and the general economic slowdown on corporate earnings. NSE-listed companies during the period grew earnings by 10%, compared to the same quarter a year ago. That is a fair number.
In the Q2 numbers, we should start seeing the broader impact of economic slowdown materializing, knowing that the 2018 budget was signed into law barely two weeks ago, at the end of first half of the year. Specifically, we should see slower demand driving slower revenue growth among companies. Since we have already seen low prices, any average earnings are made to be beaten. And these earnings will only drive down the Price/Earnings ratio of stocks, making equities even more attractive for the long term.
Trading on Thursday was highly volatile, as the NSE index opened on the downside and lingered till midday during which it touched intraday lows of 37,075.09 basis points, from its high of 37,253.25bps, before retracing up sharply by afternoon to close at 37,226.44bps on improved volume of trade.
Market technicals were negative and mixed with high traded volume in the midst of negative market breadth and positive sentiments, as revealed by Investdata’s Daily Sentiment Report showing a ‘buy’ pressure of 85%, while ‘sell’ volume for the day was 15% on a volume index of 0.78 of the day’s total transactions.
The momentum behind the day’s market performance was weak as reflected on the money flow index at 33.49points, down from the previous day’s 34.24 points, an indication that funds are leaving the market, even when liquidity has been low long before now, due to the exit of smart money.

Index and Market Cap

At the end of Thursday’s trading, the NSE composite index shed marginal 26.81basis points, at 37,226.44bps, after opening at 37,253.25bps, representing a 0.07% decline, just as market capitalization, shed N9.71bn as it closed at N13.49tr, from an opening value of N13.5tr, also representing 0.07% value loss.
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The day’s downturn was impacted by losses recorded in low, medium and high cap stocks like Nigerian Breweries, Zenith Bank, FBNH, UBA, Access Bank, Forte Oil, Oando, Honeywell, Dangote Sugar and Dangote Flour. These impacted negatively on the NSE’s Year-to-Date return. This deepened the NSE loss position to 2.70%, while market capitalisation loss stood at N124.17bn, same as 0.91% below the year’s opening value.

Bearish Sector Performance

Sectorial performance for the day were bearish except for the NSE Industrial and Consumer goods sectors that closed in green, while other indexes closed in the red same as the general market.
Market breadth was negative as decliners outweighed advancers in the ratio of 30:15 to continue three sessions of down market.
Market activities were up in volume and value by 22.08% and 2285% respectively to 350.47m shares worth N4.6bn from previous day’s 287.09m units valued at N3.75bn. Volume was boosted by trading in financial services, consumer goods and air services provider stocks like Nahco, Access Bank, Zenith Bank, Sovereign Trust Insurance and International Breweries that witnessed increased trading to top the activity chart.
Custodian Investment Plc and International Breweries were the best performing stocks, as they topped the advancers’ table after chalking 8.45% and 5.61% respectively to close at N6.80 and N40.50 each, due to their low-price attraction and expectation of interim of dividend.
On the flip side, Beta Glass and Tantalize were the worst performing, losing 10% and 9.09% respectively to close at N27.00 and N0.31 on profit taking and market forces.

Market Outlook

We expect mixed performance, this being the last trading day of the week expected to usher in the Q2 earnings season next week, since equities remain undervalued with higher yields. Investors should review their position in line with their investment goals and act as events unfolds in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value, especially during this season were 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.

The Date: Investdata Stock Market Training Workshop

On Saturday, July 28, 2018, Venue Ostra Hall & Hotel Alausa Ikeja Opposite NNPC Gas Plant

Theme: Comprehensive Stock Trading & Investing Toolkit for Rest of 2018

Sub Topics

Review of 2018H1 Market & Economic Performance: How Fiscal Reforms and Stimulus Will Support the Market/Economy in 2018H2.
In this presentation, the speaker will discuss how historically the Fiscal and Monetary policies have influenced Nigeria’s stock market, the implications for the second half and it would drive equity prices higher as recovery continues, impact of the new NSE market Structure.

2018H2 Trading Checklist: How to Find Winning Stocks in Nigeria’s Volatile Equity Market

After the prolonged correction, volatility is here to stay for the rest of 2018. Is it time to start worrying about losses suffered so far, a flattening yield curve or time to relax due to the outstanding earnings season? Better yet, is there a way to harness increased volatility to your advantage? Our facilitator, a stock market expert will show you how to handle increased volatility in 2018. He’ll offer insights into forces impacting today’s market. He will share, using real-time examples, his ultimate checklist to finding winning stocks propelled by volatility. This simple strategy allows you to quickly evaluate stocks and to better time entry and exit points, while understanding market forces moving your portfolio

How To Generate Consistent Superior Equity Returns and Income With Dividend Stocks

Here, the expert will discuss his approach to generating equity income by investing in undervalued dividend stocks, what he looks out for when trading dividend stocks at a discount to historical valuations on multiples of price to sales, earnings, cash flow, book value, and enterprise value to EBITDA. In addition, he requires companies to have positive operating cash flow over the past 12 months, with dividends covered comfortably by cash flow.

Powerful Patterns and Effective Strategies for Trading Shifts in Market Volatility

Recent and ongoing changes in market volatility present both risks and opportunities for discerning traders. Learn some of the most effective strategies for taking advantage of the high-probability trading opportunities available in equities, while minimizing risks associated with stock market trading. The six most powerful patterns in the market to trade, how to know which patterns and strategies to specialize in for consistent results and the critical difference between oscillating and momentum patterns.
Call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467