All Eyes On Q1 Earnings, Economic Data, Low Equity Valuation, For Price Reversals

Trading on the Nigerian Stock Exchange for the week on Monday was yet another bad session, as the benchmark All-Share index opened with a gap down that continued all morning, even as analysts hope that the numbers from the Q1 earnings season and the low valuation of stocks in the market would result in reversal in the coming days.
By midday, it tried to rally, got right to the breakdown point, at resistance and rolled over only to make lower lows. This resulted from losses suffered by high cap stocks and particularly, the N10.50 price adjustment of Dangote Cement Plc, the market’s most capitalized equity for the dividend recommended by its directors for the year ended December 31, 2017.
The release of Q1 earnings reports is expected to boost a pick-up of the NSE indicators this week. The results are likely to support the reversal attempt that was suppressed by Monday’s pullback, which may not last, once the anticipated Q1 numbers start hitting the market, serving as the needed catalyst to stop the ongoing price decline and sell off in the market.
The driver will be positive surprises, considering the prevailing low stock valuations, which is what market watchers are looking onto as the week unfolds.
From the just concluded 2017 earnings season, remember we have corporate earnings that are forecast to grow about 15% this year, despite being a pre-election year, due to the expected increasing political spending that will further boost consumption. This factor is expected to sustain the ongoing economic recovery that and lead it onto the path of growth and development, notwithstanding some uncertainties that come with the general elections.
The falling rates in the money market, as well as the rising oil prices should be a plus for stocks, especially now that Nigerian equities are cheap and undervalued. Last week, we saw for the first time in April that stocks are getting ready for reversal which we believe positive Q1 earnings and economic data would support.
Meanwhile, market technicals on Monday were weak and mixed as volume traded was low on a strong buying pressure, positive market breadth and improved sentiments. Buying position was 79% and selling volume, 21% on a volume index of 0.40 of the day’s total transactions. Money flow index is looking down at 44.78 point from the previous day’s position of 48.72 points, which is an indication that funds are gradually leaving the market again.

Index and Market Cap

The All Share Index shed 395.33 basis points, closing at 40.533.37 basis points after opening at 40,928.70 bp, representing a 0.97% decline on a low volume that was higher than the previous day’s. Similarly, market capitalisation for the day was went down by N132.8bn to close at N14.64tr from an opening value of N14.78tr, also representing 0.97% value loss.
The day’s downturn was due to losses suffered by medium and high cap stocks, like Dangote Cement, NB, Double One, Presco and Access Bank. This impacted negatively on the NSE’s Year-to-Date returns, which contracted to 5.99%, just as market capitalisation gains for the period dropped to N1.03tr, representing 7.58% above the year’s opening value.

Mixed Sectoral Indices
Sectoral performance for the day was mixed as the NSE Industrial Goods, Banking and Oil/Gas were up due to price appreciations in Zenith Bank, UBA, Seplat, Oando and Lafarge Afrca, while other sectors closed in red.
Market breadth for the day was positive as advancers outnumbered decliners in the ratio of 26:20 despite the halt in the up market.
Market activities were up in volume and value by 15.42% and 53.3% respectively to 192.5m shares worth N3.13bn from the previous day’s 146.12m units valued at N1.54bn.
Transaction volume was boosted by financial services and oil stocks like GTBank, Japaul Oil, Fidelity Bank, Zenith Bank and UBA, which witnessed increased trading to top the activity chart.
Skye Bank and Oando were the best performers for the day, topping the advancers’ table after gaining 10% and 9.4% respectively to close at N0.88 and N7.55 each. This was due to market forces and sentiment.
On the flip side, UACN Property Development Company and Double One were the worst performing, after losing 7.90% and 5% to close at N2.58 and N190.00 respectively on profit booking and market forces.

Market Outlook
We expect a reversal on the strength of low valuation amidst ongoing volatility and portfolio realignments, ahead of Q1 scorecards and economic data. Even so, value investors continue to position for the short and long-term on the strength of company fundamentals.
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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Again, from the INVESTDATA team, we say a big thank you.

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

Photo caption: From left to right, Ms. Tinuade Awe, Executive Director, Regulation Division, The Nigerian Stock Exchange (NSE); Michel Puchercos, Group Managing Director/CEO, Lafarge Africa Plc; Oscar Onyema, Chief Executive Officer, NSE; Tony Elumelu, Chairman, United Bank for Africa (UBA) Plc; A.B.C. Orjiako, Chairman, Seplat Petroleum Plc; Mrs. Mosun Belo-Olusoga, Chairperson, Access Bank Plc; Mobolaji Oludamilola Balogun, Chairman, Lafarge Africa Plc; Herbert Wigwe, Group Managing Director/CEO, Access Bank Plc; Austin Avuru, Chief Executive Officer, Seplat Petroleum Plc; Kenedy Uzoka, Group Managing Director, UBA Plc during the Closing Gong Ceremony in commemoration of NSE Premium Board migration at The Exchange on Monday.