February Market Roundup

The year 2018 is only two months old. However, Nigeria’s capital and money markets have seen a lot of mixed performances, with equity prices oscillating on the floor of the Nigerian Stock Exchange (NSE) during the period to close lower. This followed the wind of correction and profit taking that blew across the market as investors it entered the month that usually heralds the pre-earnings reporting season. The correction wave was also not out of place or totally unexpected, after the superlative rise in the price of most stocks as the hit their 52-week highs, changing the direction of the market in January which is traditionally known as a period when investors sell down to resolve personal commitments such as school fees and house rents among others. The NSE attained a YTD return on investment of over 17% before yielding to the gradual but steady downward pull.
There was also the factor of rates in the money market dwindling with bond yields for the same period oscillating thereby keeping funds flowing into the financial market looking for a window with better returns.
The increasing investors’ confidence in the economy and market fundamentals had spur the early rally in the year that brought the changing pattern in the market today and necessitated new investment strategies to move with the trend and profit from the transforming market. The technology driven stock market in a recovering economy with strong potentials of growth has higher possibilities of sustaining its uptrend, despite pullbacks here and there which is part of equity investments.
The positive economic data before now had revealed where the economy is heading with the latest stronger-than-expected 2017 full-year GDP of 0.83%, compared to the 1.58% contraction reported for 2016, which is a signal that the nation’s economic recovery is seriously on track driven largely by improvements in all major sectors of the economy.
This is not forgetting factors like the rising oil price and continued intervention in the FX market by the Central Bank of Nigeria (CBN), which has helped to stabilize the exchange rate of the Naira, thereby impacting positively on the country’s real sector. While Investdata calls on the monetary and fiscal authorities not to wish away the latest report by the International Monetary Fund (IMF) that whereas the Nigerian economy is out of recession, more Nigerians are being pushed daily below the poverty line, we also note the need for a rework of various policies to ensure more jobs are created, particularly in labour intensive sectors, in addition to the desperate need for government to take investment in infrastructure more seriously to ensure even its own 3.5% growth, becomes, in the words of Adams Oshiomhole, immediate past Edo State governor, “job-led” rather than “jobless,” a point the IMF report seems to be making.
Also, there is the urgent need for the 2018 fiscal year’s budget to be passed soon by the National Assembly. Already, the second month of the year is gone, especially given that politics would start soon, this being a pre-election year where politicians cross the country on campaign trail in search of votes and governance often goes into auto-pilot.
Meanwhile, the market’s performance in the 20 trading sessions of the month has been mixed with nine trading sessions of down market and eleven of bull market to halt the four months of bullish transition as it closed on a negative note at 43,330.54 basis points, helped by Wednesday’s strong rally propelled by the exchange’s most capitalised stocks. The index in February touched a high of 44,684.38bps from an opening figure of 44,343.65, representing 2.28% decline over the period.
Market technicals for the period was mixed as buying pressure of total transactions for the month was 58%, while selling position was 42% with volume index of 1.71 and money flow index at 87.56 to halt the previous month’s up market.
Similarly, market capitalisation for the month lost N346.08bn to closed lower at N15.55tr, from an opening value of N15.9tr, representing a 2.20% depreciation in value. There was mixed sentiments induced by the gale of corrections in the developed markets extended to emerging economies.
Despite the mixed sentiment before now, performance on the last trading day of February seemed to usher in positive sentiment for the 2017 earnings reporting season.
This last minute notch took the NSE All-Share index’s year-to-date positive position to 13.3%, just as market capitalisation for the same period was up to N1.94tr, representing 14.26%.
Market breadth for the month was negative and weak as the number of decliners outpaced advancers in the ratio of 67:25 to short-live the four-month bull run and reverse January’s low valuation attraction and rally that was induced by a high inflow of funds by domestic and foreign investors in search of juicy returns.
The month’s biggest decliners were Consolidated Hallmark Insurance, which was heavily impacted by the NSE’s new pricing rule and weak numbers. It dropped 48% of its opening price for the month; followed subsector peer- Unic Insurance, which lost 47.83%; ahead of CourtVille Business Solution’s 46% slide; and Multverse, 37.5%. Second-Tier low price banking stocks were among the top losers, including other low price stocks that rallied heavily in the previous month. The advancers were led by Linkage Assurance, which closed 24.64% better; Unity Bank, 17.11%; NEM Insurance, 16.02%; BetaGlass, 15.64%; and Unilever, 51.20%.
The month’s traded volume was down by 55.06% to 9.51bn shares from 21.16bn in January.
During the month also, the following companies released their 2017 full year results: Nigerian Breweries, Total Nigeria, Transcorp Hotel, United Capital and Africa Prudential, all of whcih recommended dividend payment for shareholders’ approval.
The good news is that three of them grew their payout, despite the mixed numbers released. Total Nigeria and Africa Prudential’s dividend of N14 and N0.40 respectively are impressive, ushering in the 2017 dividend declaration season.
As traders and investors position for earnings season amidst the up and down movement in the market, decision on whether to HOLD, BUY or SELL would depend on whether earnings beat market expectation and shareholders are rewarded adequately in reports being expected by the market ahead of this month end’s deadline.
Also, it is expected that upward movement of crude oil prices will support Nigeria’s 2018 budget, just as continued peace in oil-rich Niger-Delta region, if it will be implemented properly.
Considering these factors, investors who understand the operations of the stock market should take the opportunity to identify and enter good stocks among the over 110 quoted companies on the NSE with December 31, 2017 as their financial year-end which are due to release their audited reports on, or before March 31.
It is obvious that investment is against expectation, therefore, when such expectation is not met there is need to cut losses quickly to protect funds.
As investors, it is expected that you relate the current selling price of the stock on the floor of the exchange with its third quarter earnings, the previous year full Earnings Per Share and the last dividend paid, since the latest correction had made many stocks cheaper and boosted their yield. Such comparison will help you project whether the company is likely to pay certain amount as dividend or not, before buying into the stock. Earning has always been a function of equity price movements, in addition to corporate actions of these companies, which are expected to attract more market players, dividend investors and possibly foreign players to the market as economic data remained upbeat with the latest NBS report on the state of the nation’s economy as at December end 2017.
In the days and weeks ahead, expect volatility and repositioning to continue, while profit taking will reduce on the strength of expected payout and earnings surprises.
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.
We advise investors to allow numbers guide their decisions while repositioning for the year trading activities, 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.
Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the INVEST 2018 traders and the investors’ summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.
Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.
Meanwhile, a big THANK YOU to facilitators and participants that made the Chart Summit over the weekend a huge success. The eyes of participants were opened to the three tents of technical analysis and how it can enhance traders income, as well as simple trading indicators and tools for successful traders were revealed. Charting of the NSE Index on short and long term direction movements were carried out to guide investors and traders using technical indicators to know the energy behind funds entering the market, or individual stocks and when such funds begin to exit.

Here are some of the great feedbacks from the just concluded Chart Summit:

I have not seen a more lucid, concise, organized & insightful trading and investing educational presentations than the chart summit. All the speakers opened my eyes to how to manage risk using TA, despite the fact that I have been playing the market for 21 years. Mr Ambrose thank you. Please keep this good work you are doing for Nigerians.
Ikechukwu Olisa, an investor

Ambrose and Tunde’s presentations were the simplest, clearest and best understood of the many that I have heard in my trading lifetime of nearly 25 years, please keep it up. Thanks for your time
Oyebola Ademola

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Thanks Mike for opening my eyes to risk management and portfolio selection using Technical Analysis tools. Thanks to investdata for putting chart summit together for novice and advance traders. It was well presented and right to the point. Again thanks so much for the beautiful presentation. It’s superb.
Musa Ahmed

Chart Summit on technical analysis for novice and advance traders home study pack will be available on Friday, March 2, 2018, for those who have booked for the USB, you can play it on your phone, TV and laptop. Those interested in the pack should send ‘Yes’ or call any of: 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO | Investdata Consulting Ltd
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