Market Update for May 15, 2018

The nation’s stock market on Tuesday continued its volatility and downtrend to record another back-to-back negative session as selling pressure was sustained majorly in the banking sector to further drag the market lower after breaking the first strong support level of 40,725.80.
The benchmark Nigerian Stock Exchange (NSE) All-Share Index opened on a slide that was reversed by mid-morning, but pulled back again before midday, as it continued the up and down movement before closing negative after touching intraday highs of 40,723.49 and lows of 40,565.66 on a low traded volume.
Also, on Tuesday there was another positive economic news as the National Bureau of Statistics (NBS) release the Consumer Price Index for the month of April, which came in better than expected, with the headline inflation rate declining further for the 15th consecutive month to 12.49%, from March level of 13.34%. Among others, it confirmed the improving state of the economy, following which analysts are looking to the Central Bank of Nigeria (CBN) at next week’s Monetary Policy Committee (MPC) ease Monetary Policy Rates, arguing that inflation has in two months remain below the 14% Monetary Policy Rate (MPR), given that in theory, interest rate should not be above inflation.
Investdata believes something should be done but notes the negative effects of spending ahead of and during the approaching 2019 general elections, as well as the late approval of the 2018 budget any moment from now, and the recent move by the government to settle contractor debts and obligations to pensioners of the defunct Nigerian Airways. The payment of contractors will have positive impact on the banks profitability and reduces the NPL that had eaten into the bottom line of the financial institutions (READ). As a sign that we should not begin to rejoice just yet, the National Assembly has reportedly raised the 2018 budget by over N508bn, bringing it to N9.12tn, from the N8.612tn original estimates presented to the law makers on November 7, 2017 by President Muhammadu Buhari.
Market technicals for Tuesday were negative and mixed as sell offs in high cap stocks reduced in the midst of low volume and negative market breadth, just as selling volume stood at 60% and buying pressure, 40% on a volume index of 0.55 of the day’s total transactions. The bearish run has reflected in the money flow index as energy behind the market movement remains weak at 56.80 points from previous day’s 61.77 points. This is an indication that funds are still leaving the market.

Index and Market Cap
Benchmark Index (ASI) for day shed marginal 62.19 bps to close at 40,615.42bps, after opening at 40,677.91bps, representing a 0.15% decline on a low volume that was marginally lower than the previous day’s. Similarly, market capitalisation went down by N22.41bn to close at N14.71tr from an opening value of N14.73tr, also representing 0.15% value loss that further threw investors into red position.
The session’s downturn was as a result of profit booking in low, medium and high cap stocks like GTBank, Zenith Bank, Fidelity Bank, Oando, ETI, FBNH, Diamond Bank, UBA, Cadbury and Flour Mills. This impacted negatively on the NSE’s Year-to-Date returns, which dropped to 6.20%; while market capitalisation gains for the period fell to N1.12 trillion, stand at 8.10% above the year’s opening value.

Mixed Sector Performance
Sectorial performance for the day were largely bullish, except for NSE Banking that closed in the red, while NSE Oil/Gas was flat and others were in the green to close higher, due to value gain in Nestle, NB, Continental Reinsurance, Wapic and CAP.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 25:12 to continue two days down market.
Market activities were mixed as volume traded contracted by 7.0% to 203.36m shares from previous day 218.76m, while value was up by 98.5% to N4.43bn from the previous day’s N2.29bn.
Transaction volume was boosted by financial services and oil stocks like Guaranty Trust Bank, UBA, Fidelity Bank, Zenith Bank and Oando which witnessed increased trading to top the activity chart.
The best performing stocks were Sovereign Trust Insurance and Continental Reinsurance which topped the advancers’ table gaining 5% and 4.23% respectively to close at N0.21 and N1.48 each. This was due to market sentiments and forces
On the flip side, Vertas Kapital and Diamond Bank were the worst performing, losing 9.52% and 9.39% respectively to close at N0.38 and N1.64 each purely on profit taking and reactions to unimpressive earnings report.

Market Outlook
We expect a marginal rebound on bargain hunters take advantage of low prices in the midst of volatility as investors reposition their portfolios, on the strength of company’s stronger numbers to start the financial year, as economic fundamentals become more robust as reflected in the April consumer price index. The market is expected to also price the news of plans by the fiscal authorities seek National Assembly approval to settle contractors’ debt which will boost economic activities. We expect Q1 GDP and outcome of MPC meeting next week to give direction. Investors should not panic out of their position but watch events as it unfolds
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing and Q1 results are expected in the market arena.
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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