Investors Focus On Q3 Financials, Amidst Volatility, Bargain Hunting In Penny Stocks

Market Update for September 6, 2018
It was yet another ugly trading session in Nigeria’s equity market on Thursday, closing lower on a continued downtrend movement that has spanned over eight months, with the benchmark All-Share index making lower lows on investors’ weak sentiments.
The prolonged downturn has made the NSE rank among the worst performing markets in Africa and even globally, after achieving over 45% gain that helped it emerge best performing exchange in the world in 2017. This growth trajectory extended into January 2018, suspending the usual January effect with a huge gain of over 17% in one month, the first of its kind in the last 15 year.
These were on the strength of positive macro-economic indices, stronger corporate earnings, rising oil price and consumer confidence that attracted inflow of capital. But, as the year progressed, factors against the market started unfolding especially after the fiscal authorities seemingly went to sleep in Q1, failing therefore to induce some form of stimulus or reforms to sustain the growth tempo. Instead, government spent all of the time celebrating the nation’s emergence from economic recession, without giving a direction, a situation that ultimately reflected in the nation’s Q2 2018 GDP which declined to 1.5% from 1.99%.
This was also happening at a time of rate hike in developed economies and markets, a situation that triggered early selloffs and profit booking, heightened by political risks and economic slowdown, coupled with the delayed passage and assent of the 2018 budget. Even so, budget implementation and style of funds disbursement are conspiring to making Nigerians not to feel the impact of the N9.1tr budget. Feelers are that most of the capital projects approved by the Federal Executive Council (FEC) are not cash-backed, contrary the impression given to the citizenry. This may have accounted for the poor level of economic activities and seeming illiquidity in the country.
The NSE opened down, moving lower, before making lower-lows, after which it rallied marginally by the afternoon from intraday lows of 34,087.26 basis points to touch a high of 34,438.13bps before pulling back to close the day red at 34,110.22bps on a low traded volume.
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Thursday’s market technicals were negative with high sell sentiments, low volume traded and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 93% and ‘buy’ position at 3%. Volume index was 0.68 of the day’s total transactions.
The energy behind the day’s market performance was however weak, despite the slight improvement, as reflected in the money flow index at 42,55bps, up from previous day’s 41.99points, indicating that funds entered some stocks in the midst of the prevailing low market liquidity.

Index and Market Cap
The All Share index set for danger zone as it lost 304.15bps, closing at 34,110.22 basis points, after opening at 34,414.37bps, representing a 0.88% decline, just as market capitalisation lost N101.14bn, closing at N12.45tr, from N12.56tr, representing a 0.88% value loss, thereby deepening investors red position.
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Thursday’s downturn was due to losses suffered by low, medium and high cap stocks like Guaranty Trust Bank, Unilever, UBA, Zenith Bank and Eterna that impacted negatively on the NSE’s Year-to-Date return now at 10.89%. Market capitalisation within the period dropped to N1.28tr, or 7.86%.
Bear Sector Performance
Sectorial performance for the day was largely bearish, except for the NSE Industrial Goods and Oil/Gas that closed higher by 0.38% and 0.15% respectively, while the NSE Banking and Conglomerates indexes topped the table with 2.46% and 1.73% respectively. Market breadth was negative as decliners outpaced advancers in the ratio of 31:19 to continue bear transition.
Volume and value were down by 17.84% and 4.17% respectively to 164.5m shares worth N2.07bn, from the previous day’s 200.28m units valued at N2.16bn.
Transactions for the day were boosted by trading in financial service stocks that witnessed increased trading to top the activity chart, like: Guaranty Trust Bank, UBA, Skye Bank, Jaiz Bank and FNBH.
AG Leventis and Fidson Healthcare were the best stocks as they topped the advancers’ table, after gaining 10% and 9.09% respectively to close at N0.44 and N6.00, purely on market sentiments and forces. On the flip side, Wapic Insurance and Eterna were the worst, losing 10% and 9.42% respectively to close at N0.36 and N6.25 on market forces and profit booking.

Market Outlook
We expect the market to remain volatile as bargain hunters take advantage of the low-price regime, in the midst of political risk especially as primaries kicks off and defection continued.
Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released has given basis insight of companies earnings power that are likely to drive prices and determine the market.
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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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467