NGSE Remains Volatile, Amidst Month, Quarter-End Rebalancing By Traders, Investors

Market Update for September 26, 2018

Tuesday’s gain by the composite Nigerian Stock Exchange (NSE) All-Share index suffered a reversal at the end of midweek’s trading session on profit booking, amidst the ongoing interpretation of the implications of Tuesday’s Monetary Policy Committee (MPC) and the comments made by the members (READ). This is particularly true of the fears expressed by the committee about the possibility of Nigeria slipping back into recession, judging by the gradual slide in GDP, unless something is done to check the economic drift. Based on this fears, among others like the resurgence in inflation, the committee by majority vote, opted to leave all the Monetary Policy rates unchanged to watch as events unfolds in the last quarter of the year, leading to next year’s general elections beginning in February.
Another rate hike in the U.S will further put pressure on emerging market economies like Nigeria, as it will enhance the yield return on US 10-year Treasury Bills.
The NSE benchmark index started out the day on a marginal upside movement, before pulling back between mid-morning and afternoon on selloffs in high cap stocks that had rallied in the last few trading sessions. This was after hitting intraday lows of 32,952.70 basis points from its high of 33,202.30bps, before retracing slightly up at the close of the day trading at 32,963.27bps on a low volume and high selling pressure. MACD crossed over the signal line on a daily chart is strong to support an uptrend in the short-term, but on the back of market forces and sentiments.
Prior to the recent seeming rebound after the market had made a 15-month low at 31,938.6bps on September 13, 2018, before recovering to 33,114.44bps from which bargain hunters are expected to take profit with month-end around the corner.
With the market looking forward to the last quarter of 2018, 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.
Market technicals on Wednesday were negative in the midst of low volume traded, high selling pressure and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ position of 96% and ‘buy’ position at 4%. Volume index was 0.74 of the day’s total transactions.
The driving force behind the day’s market performance was strengthened, despite the profit taking moves in blue chips stocks as shown by the money flow index at 57.52bps, which was the highest reading in the last three months, indicating that funds are entering stocks in the midst of low liquidity.

Index and Market Cap
The benchmark Index at the end of midweek’s trading shed 151.17bps to close at 32,963.27bps, after opening at33,114.44bps, representing a 0.46% decline, just as market capitalization lost N55.19bn to close at N12.03tr, from an opening value of N12.09tr, also representing 0.46% value loss.
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Wednesday’s downturn was impacted by losses recorded in medium and high cap stocks like: Dangote Cement, Nigerian Breweries,Flourmills, FBNH, Stanbic IBTC, Berger Paints, National Salt, Oandoand Custodian Investment Plc, among others. This impacted negativelyon the NSE’s Year-to-Date return, increasing the loss to 13.81%, while market capitalization for same period had fallen to N1.57tr, or 11.54% from the year’s opening value.

Bearish Sectoral Performance
All the sectorial performance indexes were largely down, except for the NSE Banking that closed green, amidst the demand for banking stocks ahead of their Q3 numbers which may likely beat expectation on the strength of fee and commission income.
Market breadth was negative as decliners outpaced advancers in the ratio of 23:17, to reverse the previous day’s up market. Market transactions in volume and value were down by 22.77% and 37.50% respectively to 172.2m shares worth N2.05bn from the previous day’s 222.96m units valued at N3.28bn. This was largely driven by financial services and conglomerates stocks like: Fidelity Bank, GTBank, UBA, Transcorp and Zenith Bank.
Uacn Property and Niger Insurance were the best performing stocks that topped the advancers’ table with 10% and 8.78% to close at N1.87 and N0.37 each respectively, due to their low-price attraction and market forces. On the flip side, Berger Paints and Prestige Assurance were the worst performing, losing 10% and 9.76% respectively to close at N6.30 and N0.46 on market forces.

Market Outlook
We expect the market to maintain volatile as end of the month/quarter are here 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 determine market 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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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467