Market Update for May 30, 2018

The free fall of equity prices and pessimism about the Nigerian Stock market continued on Wednesday, as the month of May draws to a close, with the benchmark All-Share Index closing lower for the ninth consecutive session, in what is set to become the worst month of this year so far in the four straight months of correction. The lingering correction has almost wiped out the total year to date gains, as sentiments remain negative to reflect weak money flow in the market, while selling pressure in highly capitalized stocks persists.
Trading activities at the midweek resumed on a negative note amidst sustained bear dominance after Tuesday holiday to mark Nigeria’s democracy day. It started on a positive upside movement that lasted till midday as the index touched intraday highs of 39,177.53 before pulling back to the low of 38,603.32 by afternoon due to sell-offs in high cap stocks that dragged the market down. This was despite the relative improvement in investors sentiment that reflected on the market breadth.
The market broke down the lower line of the bearish channel in search of support level ahead of March year-end earnings reporting period, even as the losing streak increased.
Wednesday’s market technicals were negative and mixed as the bearish transition continued on a relatively high traded volume in the recent days of decline, in the midst of negative market breadth, with high selling pressure of 99%, while buying volume was 1% on a volume index of 0.96 of the day’s total transactions. The persistent sell-offs during the day reflected in the money flow index which stood at 12.56bps from previous day’s 12.46bps, indicating that liquidity or energy in the market is low and too weak to drive prices as funds leaving the market moderate to a flat position.
The seeming buying interest in the market at midweek however shows support and reversal is in sight.

Index and Market Cap
Midweek’s trading closed with the composite NSEASI shedding 422.10bps at 38,606.41 bps, after opening at 39,028.51 bps, representing a 1.08% decline on a relative high volume that was higher than the previous day’s. Similarly, market capitalisation went down N152.9bn to close at N13.98tr from an opening value of N14.14tr, also representing 1.08% depreciation in value as investors suffered more losses. The NSE Index finally broke down the 39,000 mark to close at 38,606.41 as Nestle, NB, Dangote Cement, International Brewery and Lafarge Africa suffered losses.
The market is likely to create a strong support level around 38,000 to 37,800bps, should the buying interest continue to improve ahead of the release of results by interim dividend paying stocks which comes at the end of half year. This is considering the low prices of stocks that would reflect on their yields, even as 10-year U.S Treasury yield which triggered sell-offs in the emerging markets continues to decline. The situation is made even worse by latest Italian political drama, amidst the ongoing oscillation oil price.
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Wednesday’s downturn was due to sell-off in high cap stocks that impacted negatively on the NSE’s Year-to-Date returns, to drop at 0.95%; while market capitalisation gain for the period crashed to N345.74bn, of 2.02% above the year’s opening value.

Bearish Sector Performance
The sectorial performance for the day was bearish in the same direction with the general market except for NSE Insurance that closed higher as a result of gains recorded by AXA Mansard and Wapic Insurance,
Market breadth was negative as decliners outnumbered advancers in the ratio of 25:23 to continued ninth day of bear run.
Market activities were up in volume and value by 53.86% and 188.46% respectively to 342.04m shares worth N4.74bn from the previous day’s 222.29m units valued at N1.64bn. Transaction volume was boosted by financial services and conglomerates stocks like Access Bank, Transcorp, Zenith Bank, Guaranty Trust Bank and UBA, which witnessed increased trading to top the activity chart.
The best performing stocks for the session were Consolidated Hallmark and FCMB that topped the advancers’ table gaining 6.25% and 5% respectively to close at N0.34 and N2.10 each. This was as a result of market forces and low price attraction.
On the flip side, Ikeja Hotel and AG Leventis were the worst performing, losing 7.04% and 6.78% respectively to close at N2.51and N0.55 each on profit taking and market forces.

Market Outlook
We expect selling pressure to moderate and volatility continue as today marks the end of trading for the month that is usually a period for portfolio reshuffling ahead of March account full year reports in June. As equities are becoming cheaper with higher yields. Investors should review their position in line with their investment goal and take action as events as it unfolds locally and internationally.
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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