Oscillating Trend Amidst High Volatility, As Q1 Earnings Season Draws To Close

The oscillating trend in the midst of high volatility on the Nigerian Stock Exchange (NSE) continued on Thursday, reversing previous day’s down market on mixed sentiments as Q1 earnings season draws to a close. Even so, stock prices are losing momentum, despite the better-than-expected numbers released so far, and those of the 2017 December year-end reporting season.
This has remained, evidently, a source of worry for many discerning investors, especially as inflow to Nigeria’s equity market remain unstable to reflect the current weak liquidity in the economy. There is no doubt that cautious trading on the part of market players, particularly the foreign investors due to political risk associated with the 2019 general elections has kept the market in this mood as it awaits a breakdown of this level or a reversal.
Thursday’s trading started out with the benchmark All-Share index moving up, away from the lows, after opening weak in the morning, reaching intraday highs of 40,798.01 from lows of 40,727.26 and thereafter rebounding in the last trading minutes. It then closed above its opening figure at 40,777.67 on a low volume that is below the market traded average.
Despite the indication that Q1 GDP will be upbeat as we are already seeing plenty economic activities, which has translated to the Q1 corporate earnings pouring in and helped by the monetary stimulus of Central Bank of Nigeria (CBN).
Not only do we see positive and mixed performances, especially against the backdrop of record margins and positive revenue surprises by some listed companies, which means demand has remained in the upward direction. This has supported company numbers that will drive prices on the long run regardless of the continued price correction on the exchange, as earnings continue growing waiting for GDP to confirm the development.
Market technicals on Thursday were positive and mixed as volume traded was low amidst an increasing sell pressure and negative market breadth. The selling position was 64%, while buying volume was 36% on a volume index of 0.91 of the day’s total transaction. The reversal for the day was driven by demand in highly capitalized equities as money flow index continues to weaken at 40.99 points, compared to previous day’s 42.26 points, this is an indication that funds are still leaving the market, despite the seeming rally.

Index and Market Cap
The NSE All Share Index gained marginal 21.94 points to close at 40.777.67 basis points after opening at 40,755.73bps, representing a 0.12% growth on a low volume that was higher than the previous day’s. Similarly, market capitalisation was up by N49.5bn, closing at N14.77tr from an opening value of N14.72tr, also representing a 0.36% value gain.
The upturn recorded was due to price appreciation in Okomu Oil, Nigerian Breweries, Oando, Unilever, Flourmills and May & Baker which impacted positively on the NSE’s Year-to-Date returns, to rise at 6.69%. Market capitalisation gains for the period stood at N1.14tr, representing 8.42% above the year’s opening value.

Bearish Sector Performance
The sectorial performance for the day was bearish except for the NSE Consumer goods that closed green as a result of gains in Unilever, NB and Flourmills, while others declined due to continued sell-offs in Lafarge Africa (due to its sustained bad numbers), 11 Plc, UBA (which presented flat Q1 numbers) and Continental Reinsurance.
Market breadth was negative as decliners outnumbered advancers in the ratio of 26:14 to short-live the two-day bear market.
Market activities were up in volume and value by 8.0% and 36.1% respectively to 378.19m shares worth N6.26bn from the previous day’s 350.99m units valued at N4.6bn.
Transaction volume was boosted by financial services, services providers and conglomerates stocks like: Guaranty Trust Bank, Diamond Bank, FBNH, C/I Leasing and Transcorp which witnessed increased trading to top the activity chart.
The best performing stocks for the day were Oando and Okomu Oil that topped the advancers’ table with gain of 5.2% and 5% respectively to close at N9.15 and N77.15 each. This was due to positive market sentiments and forces
On the flip side, NPF Microfinance and Jaiz Bank were the worst performing, after losing 8.9% and 8.0% respectively to close at N1.84 and N0.69 purely on profit taking.

Market Outlook
Being the last trading week ahead of month-end, we expect profit taking even as investors react to earnings reports that are hitting the market in the midst of Q1 GDP expectation that is likely to confirm the positive impact of monetary stimulus and extraneous factors like upswing in oil price, among other global events now closely under watch.
Even so, value investors continue to position for the short and long-term on the strength of company fundamentals.
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 and Q1 results are expected in the market arena.
We advise investors to allow numbers guide their decisions while repositioning in any stock, 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