Better Earnings, 2018 budget, Electoral Spending, May Support NGSE Rebound If…

2018 Half year Market Roundup

Nigeria’s equity market in the first half of year had a volatile performance to close the period flat on a continued selloff and profit booking that wiped off the unprecedented rally recorded in January as the bullish ascendancy in 2017 extended into 2018, During which peaked at 45,321.83. Thereafter, it pulled back for four consecutive months, a situation that can be blamed primarily on a lack of economic direction and weak economic activities capable of boosting investor confidence.

Add this to the absence of a budget until the twilight of the first half, when the President grudgingly assented to budget that spent over six months within the chambers of the National Assembly in an election year, when politicking is known to take precedence over governance, as politicians jostle for elective positions.

This situation reflected on the Purchasing Managers Index for the period which declined from 59 points recorded in December to low of 56.5 points in May before inching up in June to 57 point, due to the slowdown in economic recovery as revealed by the 2018 Q1 GDP of 1.4%, declining from the 2017 Q4 position. The possibility of a slowdown in the just concluded Q2 is very high as economic activities within the period was down and slow, as capital outflow was high due to interest rate hike in the developed economics that triggered higher yield environment in US. There is also the impact of the unfolding trade war tension that had made investors all over the global tread cautiously.

The market’s resistance of further decline in June ahead of another earnings reporting season after it had suffered huge losses may signaled an uptrend in July if the numbers come in line with investors’ expectations. This is considering the prevailing low valuation as pension fund administrators begin a new assets classification and funding that are likely to boost market liquidity and support stability over time.

The continued positive economic data emanating from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) before now have been ignored by smart money investors that kept selling down their positions. This has prolonged the correction and made equities parade low Price/Earnings (P/E) ratios.

The improvements recorded in the Q1 corporate earnings presented to the Nigerian Stock Exchange (NSE) have, however, not supported prices so far due to selling pressure.

Meanwhile, the composite NSE All Share Index for the first half of the year recorded a marginal gain of 35.36 points to close at 38,278.55 points from the opening figure of 38,243.19 points, representing 0.09% growth on improved volume of 64.17bn shares traded, up from previous half-year’s 43.13bn units. Demand for stocks dropped as selloffs increased while hot money exited their position for more predictable markets with higher yield environment and safety, irrespective of the stronger corporate numbers that had made stock prices cheaper amidst the higher dividend yields.

The selling volume of total transactions for the period was 68%, while buying position was 32% to maintain down market, which was opposite of the previous half year’s (2017) market performance. Similarly, market capitalisation for the period went up by N26bn, closing at N13.87tr, from an opening value of N13.61tr, representing 1.91% appreciation in value. This resulted from positive sentiments for some equities that hit their 52-week high, additional shares listed after conclusion of their right issues and merger agreements.

No doubt, Nigeria’s economic recovery has slowed down with the stock market which is a leading indicator has remained bearish in the last five months of the period under review. The likely recovery in the second half of the year due to the improving corporate earnings, implementation of 2018 budget, election campaign spending, among others may further support recovery of equity prices, if the numbers beat estimates.

Market breadth for the period was negative as the number of decliners outpaced advancers in the ratio of 72:54, reversing the bullish transition of 2017 that extended to early 2018, after the market had rallied to the recent peak in January 2018

As shown in the sectoral performance chart below, the NSE pension index gave the market the most significant boost in the half-year, gaining 8%, much more than what the composite NSE All-Share Index recorded in the period. It was followed by the Insurance index that rose 7.94%, while NSE Premium gained 6.10%. Other sectors that recorded growth were:  NSE Corporate governance, Industrial, Main Board and Banking. On the flip side, the NSE Consumer goods, Oil/Gas, NSE 30 and alterative market index closed red, while the Alternative securities Market recorded the biggest loss of 12.67%.

Sector Performance First Half 2018

The best and worst performing equities in the first half of the year are recorded in the table above.

A further breakdown of the half-year performance showed that, 54 stocks appreciated in price and 24 gained over 20%, compared to their opening value at the beginning of 2018, with CCNN topping the advancers table after soaring 152.63% higher, helped by the high dividend payout from the impressive corporate earnings, proposed expansion and merger plan with Kalambaina Cement Limited, a sister company (READ MORE). The expected synergy is likely to further support the share price when the merger is consummated, would result in enhanced production capacity that will boost earnings power. NEM Insurance followed, gaining 92.77%, helped by positive market sentiments and improved numbers.  Unity Bank jumped 83.02%, coming behind NEM, while Ikeja Hotel, Learn Africa, Caverton, Eterna, Beta Glass, Fidson and C/I Leasing  closed the period better at 75.84%,71.59%,68.99%,68.25%,68.19%,62.16% and 60.47% respectively.

Also, the fact that low and medium cap stocks dominated the best performers’ chart shows the sell position in blue chips from where smart money is exiting.

The worst performers’ table were dominated by insurance stocks, despite the fact that the sector is trying to awake from its season of poor corporate governance, while rewarding shareholders with dividend in their bid to prevent their share prices from hitting the new one kobo floor set by the NSE, beginning from January this year.

Knowing that equity market is information driven, any company that fails to provide information about its operations, plans and forecast will be penalized by the investing public.  The companies that shed 40% and above were low price stocks, the highest losers for the period are UNIC Holdings, FTN Cocoa, Multiverse, Africa Alliance Insurance and Courtville which recorded 60% loss.  This was purely due to the impact of the new pricing rule and market forces. They were followed by Equity Assurance with 58% decline in value due to non-payment of dividend and the new pricing rule, others were Regency Alliance, Niger Insurance, Consolidated Hallmark Insurance and Dunlop that lost 58%,50%,48%,42% and 42% respectively.

Investdata Stock Market Training Workshop

                                 On Saturday, July 28, 2018

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.

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.

Date  On Saturday, July 28, 2018

Venue: Ostra Hotel & Hall 

Kindly call or send yes to 08032055467, 08028164086 or 08111811223.


Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467