Investors, Traders Position For Full-Year, As 2019Q3 Earnings Season Begins

Market Update for October 2
Trading activities on the Nigerian Stock Exchange for the month of October started on a note at the midweek, extending the previous session’s loss position on the back of continued volatility and mixed pattern. It is clear that discerning traders and market players who have positioned earlier are waiting for actual company numbers to start hitting the market, despite profit-taking reflected in the low volume traded.
As most traders and investors know, October is when another quarterly earnings reporting season beckons and as such would have an increased tendency for volatility.
The table below provides a clear illustration of that trend or movement in the month of October, in all of two decades.
Within the period, specifically, since 1998, according to Investdata Research, the Nigerian Stock Exchange All-Share index closed positive in 12 years and negative over a nine-year period. Over the period, the NSE composite ASI has averaged 5.71% gain.

October Market Performance Since 1998-2018 (%)
1998 -0.50
1999 3.10
2000 1.50
2001 8.00
2002 -3.00
2003 13.60
2004 2.70
2005 6.20
2006 1.30
2007 -0.80
2008 -23.40
2009 -3.70
2010 5.70
2011 1.20
2012 2.20
2013 2.30
2014 -9.20
2015 -4.70
2016 -3.60
2017 4.50
2018 -2.20
2019 ?

In preparation for the 2019Q3 earnings season, many listed companies kept the NGSE platform and, indeed, the investing public busy with notification of their closed period and board meetings to approve the September-end financial reports. As we have always noted, the Q3 scorecards are very important to investors as they make investment decisions in the final quarter of the year and ahead of the 2019 full-year financial reports in the first quarter of 2020.
At the end of Wednesday’s trading, Infinity Trust Mortgagee Bank became the first to release its Q3 numbers, kicking off the season’s earnings report with impressive numbers, with its top and bottom lines rising by 38.54% and 32.63% respectively.
It does seem that the market is struggling to resist further decline in recent times, a situation that may snap anytime soon, except there are positive economic news or policy statements enough to boost investor confidence. It is also clear that the members of the Federal Government’s Economic Advisory Council (EAC) know the nation’s economic woes and the needed solutions to proffer that would change the dynamics and position it on the path of progress and sustainability, at least from statements ascribed to them.
It is, therefore, expected that these Q3 numbers, implementation of the Central Bank of Nigeria (CBN) minimum 60% Loan to Deposit ratio and the 2019 capital budget would provide liquidity and trigger buying interests in the equity market and indeed, the Nigerian economy in general. Going further, the adjustment of LDR to 65% by December 31, 2019 (READ MORE), could force interest rates down, thereby spiking productivity and consumption across the country and given that the banks would want to lend in their bid to meet the regulatory threshold. This is also likely to help the creation of more consumer lending products.
Meanwhile, trading activities of Wednesday opened on the downside and were sustained throughout on selloffs and profit-taking in high and medium cap stocks. From its high of 27,645.40 basis points, the NSEASI touched intraday low of 27,261.25bps, before rising slightly to close at 27,314.87bps on negative market breadth.
Wednesday’s market technicals were negative and mixed, with volume traded lower than previous day’s on high selling pressure, as revealed by Investdata’s Daily Sentiment Report, which showed ‘sell’ volume of 86%, while ‘buy’ position stood at 14% on total daily transaction volume index of 0.79.
The momentum behind the day’s performance was strong but slowed down with Money Flow Index reading 60.09 points, down from the previous session’s 67.08bps, indicating that funds exited some stocks and the market, amidst repositioning ahead of quarterly earnings reports with investors taking advantage of the pullback.

Index and Market Cap
The NSEASI lost 316.69bps, closing at 27,314.87bps from its 27,630.60bps opening level, representing a 1.14% decline, just as market capitalization lost N153.68bn to close at N13.3tr, from an opening value of N13.48tr, which also represented a 1.14% value loss in investor’s portfolios. The daily time frame MACD, however, remained bullish, while the Money flow index remained relatively strong but looking down.
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The day’s decline was due to selloffs and profit-taking in stocks like Dangote Cement, Total Nigeria, Zenith Bank, Access Bank, UBA, FBN Holdings, UACN, Ecobank Transnational Incorporated, GTBank, NB, Dangote Sugar, Dangote Flour and Transcorp, among others. This impacted negatively on the NSE’s Year-to-Date loss, which increased to 13.09%, while YTD market capitalization gain fell to N1.58tr, representing 13.45% improvement over the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes closed largely bearish, led by the NSE Banking index which lost 4.51%; followed by Oil/Gas and Consumer Goods index which lost 2.01% and 1.24% respectively; while NSE Insurance and Industrial Goods indexes chalked 2.86%, and 0.08% respectively.
Market Outlook
We expect the trend to continue due to profit-taking, as bargain hunters take advantage of low stock prices to position ahead quarterly financials now that the NSE index has resisted further decline. Discerning investors should latch onto it as a way of averaging down and recouping their investment immediately a recovery stage sets in, helped by economic policies and things start to change gradually. In the process, equity prices will be influenced positively, while investors watch for sectors that have become defensive recently like insurance, banking, industrial goods, services, and oil/gas that will go bullish in no distant time. Also, all eyes are on the newly appointed economic team to settle down to churn out policies capable of turning things around.

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CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467