NSE Extends Bearish Trend, Amidst Hope For Economic Direction Ahead MPC Meeting

Trading on the Nigerian Stock Exchange (NSE) Tuesday extended its bearish trend on a continued volatility wave to close lower amidst a low traded volume and negative sentiments, despite the impressive 2017 corporate earnings and weak inflow of funds into the market, which had made equity prices react positively to the high dividend payout and yields. Even so, major market players continue to stylishly take profit because they had factored in these numbers into their pricing before now, given that the stock market is a discounting machine that prices the future into the present.
Nigeria’s case is seemingly not peculiar, given the continued decline of equity market indicators in the international markets, due to technical shake up of global economies and markets, despite the rising crude oil price over the last year, trading above $65 per barrel which is near its 52-week high.
Trading on the NSE on Tuesday started out on a weak note which was sustained through the mid-morning till midday on the back of sell-offs, after which it spiked to an intraday high of 41,466.48 after touching low of 41,232.61 that had been the major support level it tested five trading days ago, making this level an inflection point. As such, any breakdown of this point will add to more than the 10% the market has lost so far from its year-high, which calls for cautious even when changing strategy to invest for dividend income.
Market technicals for the day was weak, as traded volume was low on a selling pressure of 95% with negative market breadth, signaling negative sentiment at the peak of earnings reporting season irrespective of strong numbers and high dividend. This should ordinary be of concern for the investing public as they await the outcome of next week’s Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) two-day meeting beginning on April Tuesday. Volume index was 0.77 with money flow index momentum looking down at 38.46 points, slightly better than previous day’s 38.85 points.
At the close of the day’s trading, the All-Share index shed 211.06 points to close at 41,243.24basis points after opening at 41,454.30bp, representing a 0.51% slide on volume that is lower than the previous day’s. Similarly, market capitalisation for the day fell by N76.25bn to close at N14.9tr from an opening value of N14.98tr which also represented a 0.51% dip in value as investors portfolio continue to bleed in an earnings season.
Price depreciation suffered by low, medium and high cap stocks like NB, Total Nigeria, Guinness, PZ, UBA, Zenith Bank, UBN,ETI, Double One, Cadbury, Seplat and Diamond Bank impacted negatively on the NSE’s Year-To-Date returns, which dropped to 7.84%, just as market capitalisation gains for the period reduced to N1.3tr, representing a 9.49% YTD growth.
The composite index and sectorial performance all closed in red, except for the NSE Industrial and NSE Consumer Goods that was green. Market breadth for the day was negative also as decliners outnumbered advancers in the ratio of 22:31. Market activities were down in volume and value by 7.12% and 19.30% respectively to 352.89m shares, worth N4.14bn from the previous day’s 379.93m units valued N5.13bn.
Transaction volume was boosted by financial services, conglomerates and oil stocks like: Japual Oil, Zenith Bank,FBNH, Transcorp and Access Bank, which witnessed increased trading to top the activity chart.
The best performing stocks were GSK and MRS Oil that topped the advancers table, after gaining 10.12% and 5% respectively to close at N30.90 and N28.05 respectively on the back of their strong dividend yields and bonus share. Diamond Bank and International Brew were the worst after losing 7.32% and 5% to close at N1.90 and N54.15 respectively on market forces and profit taking.
During the trading session, CCNN (READ) released their 2017 full year results, proposing N1.25 dividends.

Market Outlook
Wednesday and Thursday, being the last two days to the expiration of the 90-day statutory period for companies with December year-end to release their audited accounts, we expect more earnings reports to the market, ahead of first quarter economic data and corporate earnings which would give the health status of the economy and the companies so far in 2018. With more income investors taking position in value and dividend paying stocks, alongside bargain hunters, we expect next week’s MPC meeting to give direction of the interest rate as inflation continues to decline thereby further driving the economic recovery and inflow of funds.
Also, expect repositioning to continue, while profit taking will reduce on the strength of expected payouts and earnings surprises.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing.
We advise investors to allow numbers guide their decisions while repositioning for 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