Nigeria’s Political Risk May Mask Market sentiments Amidst Short-Term Positioning

Market Update for the week ended January 11 and Outlook for January 14-18
It is was a mixed performance on the Nigerian Stock Exchange (NSE) last week, with the composite All-Share index rebounding in the last two trading sessions of the first full week of 2019, after suffering a six-day decline to end the period under review lower.
The renewed buying and mixed sentiments is coming ahead of the maiden meeting of the Monetary Policy Committee (MPC) for the year, release of December inflation data and the Q4 earnings reporting season, beginning from next month, the same month as the Nigeria’s Presidential election, which has slowed down the downtrend.
Investors and traders should not be confused with this move but invest wisely in fundamentally sound stocks that have the potential to rally after the elections and during 2018 full-year earnings season. The bear that had run through 2018 till now still has another last chance to extend its dominance as we expect the last minutes panic selloff before February 16 that will usher in a short bull rally in bear market which will occur ahead of the real rebound after May 29 inauguration of new government.
Market downturns provide good opportunities to find cheap high quality stocks trading below their intrinsic value. This however does not mean that cheap stocks are always good. To avoid value traps of poor companies or businesses that just look good because of their valuations, as intelligent investors like those members of Investdata buy & sell signal will not be tarp in such companies because carefully analyses stocks are given on weekly basis while our watchlist are also carefully selected for different investment purpose.
The renewed hope for 2019 growth outlook arising from the seeming positive progress in the trade talks between the two largest economies of the world, the rebounding prices in the commodity market especially crude oil and the possibility of U.S interest rate remaining flat in 2019 will trigger global economic activities again. Emerging markets like Nigeria and others will benefit from all of these, going into the year, just as it will reflect on Nigeria’s economy and stocks after the general elections. It will however depend on the ability to curtail the rising debt profile, as well as the proper implementation of the new minimum wage to avoid spiraling inflation in an economy.
Back to the market, it was a negative outing for the Index, which opened on a negative note which was extended till the third trading session with 0.78%, 1.20% and 2.33% respectively before flipping to the positive region on Thursday with 0.62% and recorded the highest gain in the last trading session with 1.06%. These were not however not significant enough to swing the index northward as it finally closed at 2.64% loss to extend the previous week red position of 1.28%.
The six-day selloff in highly priced stocks was halted by renewed interest underpriced in blue chips many of which had hit new 52-week lows, just as some others resisted further decline, reflecting the mixed sentiment among investors. Market technicals for the period was negative and weak amidst low volume traded as revealed by Investdata’s weekly Sentiment Report, showing a sell position of 64% and buy volume of 36%. The volume index of total transactions within the week was 1.01.
Momentum behind the week’s performance was weak, as shown in the early panic selloffs ahead of next month’s Presidential and National Assembly elections, as reflected in the money flow index of 28.41bps, as against 28.47bps in previous week.

Equity Indicators Last Week
The NSEASI shed 808.20 basis points, breaking down the 30,000bps psychological line that had remained a strong support level, closing at 29,830.70bps, after opening at 30,638.90bps. The index hit a low of 29,329.62bps, from a high of 30,709.65bps on low volume as players traded cautiously, represented a 2.64% decline. Similarly, market capitalization lost N301.4bn during the week, closing at N11.12tr, up from N11.38tr, representing 2.64% depreciation in value.

NSE INDEX WEEKLY TIME FRAME
The ASI also tested a new 52-week low, a continuation of this trend will however depend on market forces as changing global economics and market dynamics look positive for 2019 if factors supporting positive outlook remain intact. A market rebound after touching the red line is high. But as the election draw closer market sentiment also will remain mixed, depending on the political environment and action of its players.
Low and medium cap stocks dominated the advancers’ table for the week as profit booking and panic selling hit high capital stocks that appreciated in the last trading week of 2018. Just as the NSEASI’s year-to-date negative returns position deepened to 5.09% and market capitalization by N485.12bn, or 4.65% below the year’s opening value of N11.72tr.

Bearish Sectors Indices
The sectorial performance was largely bearish, except for the NSE Industrial index that closed green at 1.00%, helped by Lafarge Africa and CCNN, while the NSE Insurance suffered the highest loss at 7% in a week. Market breadth was negative, with decliners ’outnumbering advancers in the ratio of 44:22, to heighten the previous week’s down market.
Market activity were mixed with volume traded down by 23.03% to 1.27bn shares, as against 1.65bn units in the previous week, while value climbed by 67.30% to N14.07bn from N8.41bn. This was boosted by transactions in financial service, conglomerates and consumer goods stocks.
Julius Berger and Diamond Bank were the best performing stocks for the period that topped the advancers’ table with 22.15% and 12.22% gains respectively to close at N28.40 and N2.02 per on low price attraction and merger benefit. On the other hand, NEM Insurance and Resort Savings lost 33.49% and 26% respectively, closing at N1.73 and N0.37 on profit taking and market forces after releasing a negative earnings report

Market Outlook
We expect the overall market sentiment to remain mixed as political risk heighten in the midst of rekindling buying interest on blue chip stocks that had suffered huge losses before now, with strong earnings capacity that will support higher payout with companies like Infinity Microfinance Bank, Nestle, Nigerian Breweries, Africa Prudential and United Capital expected to be early filers. The prevailing cheap prices of stocks may trigger investor buying sentiments for short and long term gain.
However, we expect speculative trading in some stocks with strong potential upsides to shape the breadth of market performance this week, while watching the political space, since economic activities in Q4 have given insights into what the expected full year GDP and corporate earnings will look like.
With the political campaigns ongoing, Nigerians are expecting new strategies and roadmaps to address the economy, especially the rising poverty level, human capital development, decayed infrastructure and education with timeframes for delivery. These campaigns are likely to drive prices north, or south, while determining market direction before or after the Presidential election.
Investors should review their positions in line with their investment goals, strength of the company numbers and act as events unfold in the global and domestic environment. However, we would like to reiterate 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 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

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