NGSE Index Rallies As Investors Position For Dividend Income, Fiscal Policies, Economic Data

Market Update for Week Ended June 8 and Outlook for June 11-15

The Nigerian Stock Exchange (NSE), last week, halted five consecutive weeks of bear run, as bargain hunters cashed in on low prices to position for the March year end account and half year earnings season. This, expectedly spurred the buying interest noticed in the medium and high cap stocks, most of which had suffered huge losses due to the prolonged correction that spannned four consecutive months.
Moreso, the rebound seems to have ushered in another recovery, while at the same time creating trendy pattern that support short term trading with effective combination of fundamental and technical tools to spot trading opportunities in the market.
However, is pertinent to warn that there is a high possibility of the market remaining volatile in the days, weeks and months leading to the 2019 elections. What this means, in part, is that there could be a reduced rate of decline, as market players react to the expected impacts of fiscal stimulus in form of the recent amendments in c. The amendment, for example, could likely boost dividend income of investors by 10%, as withholding tax is removed. Also, the National Pension Commission (Pencom) also is coming up with reforms on assets liability risk management of the different classes of funds that would boost participation in the equity market, with the 25% of pension assets investible in the stock market. Being long-term funds, such move would help stabilize the equity market beginning from July 1, 2018 when the implementation of this reform kicks off.
Also noteworthy is the approval by the Nigerian Senate of the interim report of its Ad-hoc committee on the proposed issuance of Promissory Notes as proposed by the Federal Government to enable it settle contractor debts and other contractual obligations. This would also likely impact the economy and market positively.
More far-reaching is the expected assent by President Muhammadu Buhari of the 2018 Appropriation Bill, which is expected to boost implementation of the nation’s economic recovery and growth plan.
Despite the obvious rebound of the market during the week, before Friday pullback due to short-term profit taking from the few days rally, the improved buying pressure and low selling volume is a good sign that funds are returning to the market.
It is however important to note that money flow index slid slightly from the previous 42.64 points to 41.20 points, just as the NSE Index traded below its 20-Day moving average for the ninth week. It nonetheless remained above the long-term 100-Day Moving Average, joining other global markets to close the period on positive note.

Equity Indicators Last Week
The benchmark Index for the period gained a significant 1,852.94 basis points, closing at 38,669.23 basis points after opening from 36,816.29bps. This represented a 5.03% growth on a relatively lower volume of transactions, compared to the previous week’s.
Volume index of total transactions for the week was 0.70, with buying sentiment at 83% and selling pressure, 17%, trading above the psychological line of 38,000 after slipping below 37,000bps.
Similarly, market capitalisation for the period rose by N671bn to close at N14.01tr from an opening value of N13.83tr , representing a 5.04% value gain, which was due to repositioning in low, medium and high cap stocks.
At the end of last week’s trading, low and medium cap stocks dominated the advancers table as bargain hunters took advantage of low valuations to reposition for short-term profit, with another recovery taking off. Investors have identify support levels which triggeredaccumulation ahead of half year earnings season and interim dividend paying stocks.
Knowing that pension funds investment in equity market favours dividend companies that had five-year record of consistent payout, especially as the market’s average dividend yields remain above 4%.
The rebound of equity prices for the period impacted positively on the NSEASI’s year-to-date returns, at 1.11%, just as growth in market captalistion stands at N398.48bn, representing 2.93% rise from the year’s opening value.

Positive Market Breadth
Market breadth for the week was positive as advancers outnumbered decliners in the ratio of 49:29 on lower volume of trade and high buying pressure, as traders and investors took the opportunity of low prices to position in expectation of external stimulus or news to influences the market and impact prices positively. The week’s trading session started on a positive note and continued till Thursday, gaining 0.36%,2.48%,1.53% and 1.58% respectively, before pulling back on Friday, when it lost 0.98% due to profit booking, leaving the week’s gaining position at 5.03% on rekindled buying interests.
Sectorial performance for the period was mixed as all indexes were up except for the NSE Insurance and Oil/Gas that shed 0.61% and 1.34% respectively, while NSE AseM, nce more,remained flat.
Market transaction in volume and value were however down by 35.19% and 63.22% to 1.75bn shares, worth N31.18bn, from previous week’s 2.7bn units valued at N84.78 billion.
The best performing stocks for the week were Japual Oil and Prestige Assurance that topped the advancers table with 40.91% and 39.58% gains respectively, closing at N0.31 and N0.67 per share, as a result of market sentiments and forces. Recall that Prestige Assurance just returned from full suspension requested by its board to enable it undertake a reconstruction of its shares on June 6, 2018 (READ MORE).
The worst performing for the week were NPF Microfinance Bank and Consolidated Hallmark Insurance that lost 14.51% and 12.90% to close at N163 and N0.27 respectively on price adjustment for dividend and profit taking.
During the period under review, the share prices of Julius Berger, Lasaco Assurance, NPF Micro Finance and NEM Insurance were adjusted for dividend. This week, the prices of Cadbury, Newest ASLPlc, Conoil, Mutual Benefits and Capital Hotel are billed to be adjusted for dividend payout;

Market Outlook
We expect, mixed performance as profit taking continue in few trading sessions ahead of the March year-end accounts earnings performance and May inflation figures as players navigate to reshuffle their portfolios and exit positions that are on the losing side. At the same time, let the upbeat economic data and company numbers guide your investment decision Also, we expect the impact of the rising oil price to boost fiscal spending and support economic fundamentals.
Meanwhile, dividend income players are taking position ahead of more economic data, even amidst the expected sustained volatility and repositioning.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially as interim dividend payment is approaching.
We advise investors to allow numbers guide their decisions while repositioning for the rest of the year’s 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.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467