Drop In Money Flow May Sustain Volatility, Profit Taking, Amidst Repositioning For Earnings Season

Market Update for January 15

It was another interesting trading session on the Nigerian Stock Exchange (NSE) on Monday. Not only was it mixed to start the week, the session was action-packed until the very last minute, when it turned from deep red to green as closing gong sounded, with the composite NSE All-Share index very firm, just as the technicals finished positive. Market breadth was however flat to reverse the previous day’s negative close arising from bouts of profit taking and panic selling by investors and traders.
The session started with the index going south pre-opening, a situation that was sustained during the mid-morning as the benchmark index tested a low of 42,262.82 before starting a rebound that reduced the loss momentum at midday. It finally crossed to the green side in the afternoon session to retrace up, touching intraday highs of 43,119.44 basis points, and stayed ramped up all the way into the close. The recovery was supported appreciation in the share prices of blue chip stocks during the session.
Buying pressure stood at 100%, just as Volume index for the day’s total transactions was 1.17 points, while market breadth was at par as mentioned earlier.
The NSE’s acclaim as one of the best performing market in the world since 2017, second among emerging markets and currently the year’s best is one factor that will continue to attract attention of international fund managers and portfolio investors, who are keenly observing developments in Africa’s biggest economy. This is especially as its economy is out of recession and strongly on the path of recovery and growth, a situation that continues to be supported by the sustained intervention in the foreign exchange market by the Central Bank of Nigeria (CBN) since April 2017 through the creation of an Investors and Exporters’ Window, helping to sustain the confidence of foreign investors and in the process supporting the relative stability of the Naira against major currencies so far. Add these to the upswing in the price of crude oil above $70 and the equally stable output arising from peace in the nation’s Niger-Delta region, a guarantee of that there would be funds to execute the 2018 budget now before the National Assembly. Both the rising oil price and production output are a plus for Nigeria’s economy; as they give support the nation’s external reserves thereby further boosting confidence in its capacity to meet maturing forex obligations. Inflow into the market continued on Monday, despite the profit booking going on in the market, with foreign investors scooping 14.85m units of International Brewery at N62 per shares to increase their stake in the company.
Meanwhile, the NSE’s benchmark index gained 220.10 points to close at 43,119.00 after opening at 42,898.90, representing a growth of 0.51% on huge traded volume that was lower than previous levels. Similarly, market capitalisation for the day was up by N78.85bn, close at N15.45tr, from an opening value of N14.92tr which also represented 0.51% value gain.
The day’s upturn was driven by appreciation recorded by high cap stocks like Zenith Bank, PZ Cussons, Dangote Cement, Nigerian Breweries, FBNH, GTBANK and International Brewery. All of these impacted positively on the NSE’s Year-to-Date returns, pushing it to 12.75%, just as market capitalisation gained N1.84 trillion year-to-date, representing 13.5% growth from its opening value.
Just like the All-Share Index, the sectorial indices closed higher, except for the NSE Insurance, NSE Consumer, NSE Oil/Gas, NSE Industrial and NSE Lotus, while the NSE AseM continues to remain unchanged. Market breadth for day was at equilibrium with the advancers and decliners were in the ratio of 26:26, to halt the previous day bear market.
Market activities in volume and value terms for the day were down by 47.44% and 55.63% respectively, as investors traded 730.62m shares worth N6.3bn, compared to previous day’s 1.39bn units valued at N14.2bn. Transaction volume for the day was significantly boosted by transactions in financial services and conglomerate sectors, as trading was heavy in Transcorp, Diamond Bank, FCMB, Fidelity Bank and Access Bank that topped the activity chart as most traded by volume.
Best performing stocks at the end of the day were FCMB and Skye Bank that topped the advancers’ log with gain of 9.84% and 8.33% respectively to close at N2.79 and N0.91 each. The gains were propelled by positive market sentiments, while Eterna and UBN led the decliners’ table after shedding 6.82% and 5.00% at N6.15 and N7.98 respectively, resulting purely from profit taking activities.


As trading opens for Tuesday, we expect a mix of volatility, profit taking and repositioning for earnings reporting season as quarterly and full year score-cards of companies are expected to continue. The candlestick pattern at the end of Monday’s trading is very dicey for those seeking to conclude whether the bull is really back or not, since the energy in money flow index is slowing down. MACD crossover is still bullish. as inflation figure for December is expected to be release by NBS any moment from today
However, we would like to reiterate that investors should go for value equities, especially during this season that dividend payment is approaching.
We advise investors to allow numbers guide their decisions while repositioning for the rest of the year’s trading activities, 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. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467