Market Update for September 25, 2018
Nigeria’s equity market had a superlative trading session on Tuesday, reversing the previous down market on the strength of demand and supply forces, as blue-chip stocks had a fabulous day, recording the highest gains in recent trading sessions.
Such big moves do not, however, suggest that the market has bottomed out, until this recovery trend breaks out the first resistance level at 33,449.60 on a strong volume and positive sentiment.
Meanwhile, at the end of its two-day meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) also on Tuesday, retained rates for the umpteenth time to watch things play in the economy ahead of the ongoing political season leading to the 2019 general elections, which begins in February (READ).
Just as the MPC members noted, at this time, the CBN is only able to control interest rates and price stability, but the political risk and spending associated with the coming elections is beyond, which may informed the decision of the committee to retain the benchmark MPR in an economy that has already slowed down, going by the Q1 and Q2 GDP. As they noted also, inflation began raising its ugly head, even as Q3 GDP will likely follow the current trend, because the economy has remained stagnated in the absence of any kind of stimulus from the government. Equally important is the fact that capital inflow has slowdown, mainly from portfolio and direct investors, for which the market and the economy are suffering today, because of the uncertainties surrounding the 2019 elections.
Also, there are plans by the Federal Government to boost its revenue by as much as N289bn to finance the nation’s budget, selling some assets, after geometrically increasing its debt profile. The assets sale is projected to commence from early October.
This, combined with the rising oil price, makes Nigeria’s Q4 economic outlook positive to support the equities market, all things being equal.
The expected Q3 corporate earnings that will start hitting the in October will give more insights into how the economy had performed, even before the National Bureau of Statistics (NBS) releases its Q3 GDP data. But it is safe to be on the lookout for what other economic indices will reveal, as we move into the last quarter of the year.
Tuesday’s trading started on a gap up in the morning session, which was sustained till mid-morning to afternoon It touched an intraday high of 33,230.46 basis points from a low of 32,646.43bps, before closing the day at 33,114.44bps on improved traded volume. MACD crossed over the signal line that supports the expected short-term rebound.
As the market looks forward to the last quarter of the year, the expected Q3 earnings numbers will reveal the true state of many companies and indeed, the economy, but identifying when to buy or sell matters a lot. This is what technical analysis will do for you. The market is preparing to produce another set of billionaires for 2019 and beyond. That is why you should go for HOME STUDY PACK of the Stock Trading Workshop held by Investdata Consulting on July 28, 2018. These are audio-visual materials you can play to view the live class on your phone and laptop to help you know when to jump into the market and specific stocks, or stay out. For your Pack, call or send ‘YES’ to the phone numbers below.
Tuesday’s market technicals were positive with high buying pressure on above-average traded volume and positive market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 80% and ‘sell’ position at 20%. Volume index was 0.96 of the day’s total transactions.
Momentum behind the day’s market performance was strengthened as demand for blue-chip stocks increased, as shown by the money flow index at 51.51bps, up sharply from previous day’s 43.89bps, indicating that funds are the market during the session despite profit booking.
Index and Market Cap
The bold movement of the All Share Index at the end of the session reflected in the significant gain of 663.17bps, or 2.04% to close at 33,114.44bps, after opening at 32,451.27bps, just as market capitalization rose by N242.11bn to close at N12.09tr, from N11.85tr, also representing 2.04% value gain.
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Tuesday’s upturn was driven by value gain in medium and high cap stocks like: Dangote Cement, NB, Nestle, Guaranty Trust Bank, Oando, UBA, FBNH and Dangote Flour, among others. This impacted positively on the NSE’s Year-to-Date return, reducing the loss to 13.41%, while market capitalization for same period had fallen to N1.52tr, or 11.17% from the year’s opening value.
Bullish Sectoral Performance
Sectorial performance indexes were largely bullish, except for the NSE Oil/Gas that closed lower, reflecting the impact of bargain hunters positioning ahead of quarter end financials.
Market breadth was positive as advancers out-numbered decliners in the ratio of 26:20, even as transactions in volume and value were mixed with volume rising by 17.6% to 222.96m shares, from Monday’s 190.57m units, while value dropped marginally by 0.72% to N3.28bn from previous day’s N3.31bn. This was largely driven by financial services and consumer goods stocks like: Zenith Bank, International Brewery, UBA, Fidelity Bank and Diamond Bank.
The best performing stocks were Law Union Insurance and Neimeth Pharmaceuticals, which topped the advancers’ table with 10% and 9.68% to close at N0.66 and N0.68 each respectively as a result of their low-price attraction, ahead of the Q3 and Q4 earnings report. On the flip side, Livestock Feeds and Japaul Oil were the worst performing, shedding 8.97% and 8.33% respectively to close at N0.52 and N0.22 on market forces and profit taking.
Market Outlook
We expect the market to maintain the same mood as end of the month/quarter draws closer for window dressing by fund managers and brokers that want to balance their trading accounts for their fees, which will usher in the Q3 earning season in October. We are in a season of rising oil price, expecting new policy statement and reform that would stimulate the economy again.
The ongoing volatility is likely to persist as bargain hunters take advantage of the low-price regime, in the midst of continued selloffs and political risk, especially as shadow elections by political parties kick off any moment from now.
Already, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space.
Meanwhile, analysing the actual numbers released has given basic insights into company earnings that are likely to drive prices and determinemarket valuation.
Investors should review their positions in line with investment goals, vis-à-vis strength of 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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