Nigeria’s Equity Index Remains Red, Despite Upbeat Oil Price, Economic Data, Robust Earnings

Market Update for Week Ended May 18 and Outlook for May 21-25

Trading on the Nigerian Stock Exchange in the past week continued its third consecutive week of decline this month amidst an interplay of profit booking in highly capitalized stocks, political risk, better investment window with less risk than what obtains in the U.S. Yields on 10-year instruments hit 3.1% with stronger Dollar that had put emerging markets such as Nigeria under pressure, resulting in capital fight out of economies with low interest rates regimes. Other factors include the rising oil prices; price adjustment for dividend recommended by directors of Seplat Petroleum, Okomu Oil, UACN and Fidelity Bank.
The sustained market correction in the face of positive economic news, low equities’ valuations, healthier company fundamentals and stronger positive macro-economic indices that confirms the health of Nigeria’s economy and which has remained resilient and on the path of recovery and growth.
Players on the Nigerian bourse are seriously worried about its very high volatility just as the dicey nature of the market now with losing positions worsening ahead of the two-day Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting that kicks-off on Monday, May 21, 2018. The market corrections have also been in spite of the monthly report of the National Bureau of Statistics (NBS) showing that consumer price index have consistently declined over the past 15 months, dropping further to 12.49% in April; while Purchasing Managers’ Index (PMI) continues to expanding at 56.9 points. Expectations are that the 2018 Q1 GDP reports would show a better than anticipated growth over that of the 2017Q4.
Looking at the unfolding events globally, monetary policy may be heading towards reduced capital outflow from some markets, a situation that is likely to support the likelihood of the MPC to retain rates. This is considering the increased spending contained in the 2018 Appropriation Bill passed by the National Assembly, now awaiting Presidential assent, in addition to expected spending ahead of the oncoming 2019 elections, as well as the improved consumption, just as plans by the Federal Government to settle contractor debts, among others expected to keep much more money in circulation.

Equity Indicators Last Week
Meanwhile, the All-Share Index over the period shed 549.86 basis points, closing at 40,472.45 basis points from 41,022.31bps, representing a 1.34% decline on a relatively lower volume of transactions, compared to the previous week’s. The volume index of total transactions for the week was 0.59, with selling pressure at 95% and buying volume, 5% to continue the previous week’s losses, while trading below its 20-Day Moving Average over the last six weeks and the 41,000 psychological line. Similarly, market capitalisation for the period fell N199.2bn, closing at N14.66tr from an opening value of N14.86tr, representing a 1.34% loss resulting from sell-offs in blue chips companies.

NSE Weekly Time Frame
The advancers table for the week was dominated by low cap stocks as traders sell off their positions in the medium and high cap stocks while investors position carefully in the interim dividend companies on the strength of Q1 numbers.
The bearish performance for the week slowed down the NSEASI’s year-to-date returns, as it stands at 5.83%, just as growth in market captalistion dropped N1.09 trillion, representing 7.79% rise from the year’s opening value.

Market Breadth
Market breadth for the week remained negative as decliners outpaced advancers in the ratio of 54:20 on lower volume of trades and high selling pressure as traders exit to cut losses ahead of outcome of the MPC meeting and capital fight due to stronger US economy with high yield environment that is putting global equity markets on downside line. Selling pressure increased from 81% in the previous week to 95%.
The benchmark index kick started the week on a negative note to halt the previous Friday’s gain by shedding 0.84%, which was lingered till Tuesday as it lost 0.15% to rebound at the midweek to halt the losses with gain of 0.93% but reverse on Thursday lose 0.83% and it was sustained n Friday with loss of 0.44% to deepen the week losing position to 1.34% on sell-offs.
Sectorial performance for the period was largely bearish except for the NSE Consumer Goods that closed green, helped by value gain in Nestle and Dangote sugar. Other indexes like NSE Banking, Insurance, Industrial Goods and Oil/Gas were down as a result of profit taking in Zenith Bank, Guaranty Trust Bank, UBA, Aiico, NEM, Total Nigeria, 11 plc,, CCNN and Lafarge Africa that kept the bear transition lingering.
Market transaction in volume and value were down by 8.18% and 8.93% to 1.46bn shares worth N23.67bn, from previous week’s 1.59bn units valued at N25.99bn.
The best performing stocks for the week were Sovereign Trust Insurance and Mutual Benefits that topped the advancers table with 30% and 17.86% gains respectively, closing at N0.26 and N0.33 per share, on the back of market sentiments for low price and dividend. The worst performing were Japual Oil and Skye Bank that lost 25% and 19.15% to close at N0.30 and N0.76 respectively on market forces.
This week, the share prices of Aiico, Eterna and Omoluabi Mortgage Bank are billed to be adjusted for dividend payout; while AGM for Nestle, Fidelity Bank and Consolidated Hallmark Insurance holds this week.

Market Outlook
We expect, a mixed performance as players wait for outcome of the MPC meeting in the face of unfolding global events that is propelling capital outflow. Let the upbeat economic data and company numbers guide your investment decision repositioning. Also, we expect the impact of the rising oil price to boost the 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.
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.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467