Market Update for the week ended October 19 and Outlook for October 22-26

Trading on the Nigerian Stock Exchange (NSE) last week had a consolidation to close positive, resisting further decline on increased bargain hunting in the midst of earnings reporting season that enters into its peak as more companies present Q3 numbers that have largely mirrored the nation’s prevailing economic situation.
Corporate earnings performance, so far, seems above average, even as equity prices have made stock prices cheaper when compared to the intrinsic value of these companies, given that the market has suffered huge losses year-to-date. The prevailing low Price/Earnings ratio and rising Dividend Yields is the result of strong fundamentals and low prices that will make these earnings reports support their prices immediately the political risk, which is beyond the control of investors and regulators, is removed with the emergence of a winner in next year’s Presidential election on February 16.
This short term bull transition in a bearish market is likely to continue if there is no local or external shock. However, we advise investors to trade cautiously and target stocks with sound fundamentals, because the persistent low liquidity in the market is a minus for the market at this time.
Stock markets around the world had a mixed performance also last week, as U.S stocks stabilized after suffering decline earlier in the month. The recovery was supported by better-than-expected economic data and Q3 corporate earnings that have shown a blended 19% growth rate, the highest since 2011. This impressive performance has moderated the forward Price/Earnings ratio to below 16x, which is below its five-year average. With another rate hike by the Federal Reserve this year and three others in 2019, stock markets across the globe are likely to remain volatile.
Back home, Investdata Sentiment Report for the week, shows an increase in buying pressure, with ‘Buy’ volume at 89%, as against the 11% ‘sell’ position, while volume index of total transaction stood at 1.00. This is coming amidst new positioning and profit booking ahead of earnings season at a time the market had reacted positively to the few banking results so far made available to the investing public.
The force behind the week’s performance, improved to reflect a high traded volume and liquidity that entered the market as money flow index moved to 28.93 points from previous week’s 20.74 points.

Equity Indicators Last Week
The composite NSE All-Share index for the week sustained an uptrend, gaining 384.71 basis points to close at 32,841.69bps, from an opening figure of 32,456.98bps, representing a 1.19% growth on an increased demand for stocks that boosted the traded volume, compared to previous week’s. Market capitalization was up by 1.19%, closing at N11.99tr from the previous N11.85tr, this was impacted by price appreciation mainly in medium and high cap stocks.
The week’s top advancers table paraded a blend of all classes of stocks that enjoyed improved patronage as bargain hunting widened activities ahead of more quarterly earnings expected to hit the market.
Meanwhile, the NSEASI’s year-to-date negative returns reduced to 14.12%, just as market capitalization improved to N1.58tr negative returns, or 11.79% below the year’s opening value.

Negative Market Breadth
Market breadth remained negative, as decliners outnumbered advancers in the ratio of 42:20, amidst recovery trend and volatility wave.
The NSE index had mixed performance to consolidate at the end after opening for the week on a negative note, but recovered on Tuesday, giving up the gain by midweek, before retracing up on Thursday and Friday, when it gained 0.74% and 0.58% to close the week at 1.19% respectively.
The sectoral performance for the week was mixed as the NSE Banking, Insurance and ASeM closed up, while others: the NSE Consumer Goods, Industrial Goods and Oil/Gas indices were down, while the Premium index rose, revealing the demand for value stocks.
Market activity for the week, was up in volume and value by 50% and 55.74% respectively to 1.38bn shares worth N15.15bn, from previous week’s 915.86m units, valued at N9.84 billion.
Prestige Assurance and AXA Mansard were the best performing stocks during the period, chalking 12% and 10% respectively, closing at N0.56 and N1.98 each, due to market forces and low price attraction. The worst performing were Cutix and Niger Insurance, after shedding 42.82% and 15.15% respectively to close at N2.23 and N0.28 each on price adjustment for dividend/bonus and profit taking.

Market Outlook
We expect the slow recovery to be sustained if more expected numbers beat expectation this new week, as technical momentum support short term rebound at the peak of Q3 corporate earnings reporting season, as investors await economic and issue based campaign from the presidential candidates of various parties.
However, we believe investors can take advantage of the current low prices of stocks with strong fundamentals in order to reap medium-to-long term benefits. Stage by stage buying is recommended as investors expect inflation data for September in the new week.
There could be repositioning on the strength of earnings in the midst of unfolding events in the political environment. Investors should review their positions in line with their investment goals and take action as events unfolds in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value, ahead of end of quarter which will ushered in another earnings season, ahead of Q3 interim dividend paying equities in October/ November due to the auditing process of their financials for Q3.
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.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467