Investors Begin Portfolio Rebalancing On NGSE, Ahead Of Q3 Score-Cards

Market Update for October 9, 2018

The Nigerian stock market on Tuesday continued its volatility as profit booking and bargain hunting inter-played, forcing the benchmark indicators to close marginally lower on mixed sentiments and high traded volume, when compared to the previous day’s transaction.
As the investing public looks to the influx of quarterly earnings reports any moment from now, more companies during the session notified the market of their board meetings and closed periods as they are set to release their scorecards for the nine-month ended September 30, 2018.
Due to the importance of this account and the prevailing market dynamics in the midst of the lingering political risks, as well as continued downgrade of the nation’s economic outlook by the International Monetary Fund (IMF). This is due to the dwindling economic activities and mixed indices released so far by economic managers and the National Bureau of Statistics (NBS) and the Central Bank of Nigeria (CBN).
Traders that understand the importance of the Q3 numbers and market reaction to earnings surprises are already positioning ahead, while medium and long-term players are waiting to see the true state of these listed companies before jumping in. This is because market reactions to earnings so far this year have been weak, due to low liquidity and confidence.
The NSE index opened for the day on the upside in the morning into mid-morning before pulling back by the afternoon, after hitting intraday highs of 32,477.47 basis points (which now seem the new resistance level), from lows of 32,336.24bps, before retracing up in the last few minutes, when the day closed at 32,417.7bps.
Market technicals for the day were weak and mixed, just as sentiments, with market breadth favoring the bears, on ahigh traded volume as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 58% and 42% ‘sell’ volume. The volume index for the day’s total transactions was 1.61.
Energy behind the day’s market performance was weaken as profit taking in blue chip stocks reflected in the money flow index at 45.47bps, from the previous day’s 56.73bps, indicating that funds left some stocks to make entry points more attractive new positioning ahead of the earnings season and last quarter seasonality in the midst of low market liquidity.

Index and Market Cap
The All Share index closed the session trading at 32,417.706bps, after shedding 27.26bps from 32,444.79bps, representing a 0.08% decline, just as market capitalization dropped by N9.95bn to N11.83tr, from an opening value of N11.84tr, representing a 0.08% value loss.
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The day downturn was due losses suffered by: Nigerian Breweries, Unilever, Flourmills, Oando, Access Bank, Transcorp and Diamond Bank, which impacted on the Year-to-Date negative returns, as it contract to 15.23%, while market capitalization lost N1.8tr, representing 13.06% slide from the opening value.

Mixed Sector Performance
The sectorial performance for the day was largely bearish, except for NSE Banking and Industrial goods that closed 0.64% and 0.12% green respectively. Market breadth was almost flat as decliners outnumbered advancers in the ratio of21:20, to reverse Monday’s gain.
Market activities in volume and value were however up by 189.62% and 9.36% respectively, at 349.53m shares worth N1.46bn, from previous day’s 120.82m units valued at N1.34bn.
Transactions were boosted by trading in financial services stocks like: Royal Exchange Assurance, FCMB, Guaranty Trust Bank, Fidelity Bank and Zenith Bank.
Cornerstone Insurance and Cadbury were the best performing stocks for the session that topped the advancers’ table, with 10%and 6.74% gains respectively, closing at N0.20 and N10.30 per share, as a result of market forces. On the flip side, UnionDiagnostic andFirst Aluminum lost 9.68% and 9.52% respectively, closing at N0.28 and N0.38 each on market profittaking.

Market Outlook
As more closed period notification hit the market ahead of actual results, expect increased activities of bargain hunters in the midst of volatility and profit taking ahead for the Q3 earnings reporting season that kicks off soon. Also, the September inflation data is being expected. Investdata projects that it could be in the region of 11.49%, despite the political risk, with electioneering activities beginning.
Investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers that will give insights into expectations for Q3 GDP and full year companies earnings power that are likely to drive prices and determine themarket before or after February election.
Investors should review their positions in line with investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.

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