Profit-Taking, Volatility May Continue Amidst Repositioning For Quarterly, Full-Year Reports

Market Update for January 22

Trading on the Nigeria Stock Exchange (NSE) was once more interesting, mixed and highly volatile at the same time to start the week Monday on negative note, as the market bowed to selling pressure amidst profit talking and stock revaluations to match their fundamental strength after more prices hit their new 52-week high.
Volume was huge, breadth flat, while the composite NSE All-Share index experienced a pullback to close the day. Profit taking among the conglomerate and banking stocks were unprecedented as Transnational Corporation of Nigeria (Transcorp) and some first-tier banking stocks suffered losses.
The day started out with a little pop to the upside, and had a run up which was consolidated midmorning, reaching intraday highs of 45,321.82 around the noon hour, before it pulled back early afternoon to touch a low of 44,748.20, where it held support, and came on strong to close finally at 44,912.53 basis points.
In related news, the International Monetary Fund (IMF) has upgraded global economic outlook and Nigeria’s 2018 GDP growth forecast as exchange rate remains relatively stable in the FX market due to the sustained intervention by the Central Bank of Nigeria (CBN). This has been helped by the rising oil prices and the nation’s oil production output, with the expanding Purchasing Managers Index (PMI) to indicate the increasing economic activity and the continued positive economic data that support growth. The upward review is also despite uncertainties surrounding oil price movement and Nigeria’s political environment, this being pre-election year as politics affect policies, especially against the backdrop of the fire brigade approach of the Nigerian government.
Meanwhile, despite the high selling pressure of 71% and buying position, 29% with volume index at 5.57 of the day’s total transaction that reflected profit booking, institutional money flow index remained strong and looking up to signal that funds are still entering the market regardless of Monday’s pullback. The benchmark index shed 180.30 points to close at 44,912.53 after opening at 45,092.83 representing a decline of 0.40% on huge traded volume higher than Friday levels. Similarly, market capitalisation for the day went down by N64.59bn, closing at N16.09tr, from an opening value of N16.15tr, also representing a 0.40% value loss.
The downturn recorded in low, medium and high cap stocks at the end of the day impacted negatively on the NSE’s YTD returns, reducing it to 17.44%, just as market capitalisation gain for the period dropped to N2.48tr, representing 18.23% YTD growth.
The All Share Index and all sectorial indices closed lower, except for the NSE Insurance and NSE Industrial Goods indexes that closed higher at 0.42% and 0.17% respectively, while the NSE AseM remained flat. Market breadth was flat as decliners equaled advancers in the ratio of 26:26 to halt last Friday bull market.
Market activities in volume and value terms for the day stood at 4.44bn shares worth N15.93bn from previous day’s 1.34bn units valued at N12.52bn. Transaction volume for the day was significantly boosted by the conglomerate and financial services sectors, with heavy trading in shares of Transnational Corporation of Nigeria, Wema Bank, Sterling Bank and Diamond Bank that topped the activity chart as most traded by volume.
The best performing equities were Caverton and Wema Bank which topped the advancers table, chalking 9.90% and 9.40% respectively to close at N2.44 and N1.23 each. The gains were propelled by positive market sentiments, while Transcorp and Unilever were the worst performing, after shedding 9.20% and 5.96% to close at N2.27 and N46.20 respectively, while traders and investors took profit.
We expect profit taking and volatility to continue even as repositioning for quarterly and full year score-cards begin to hit the market any moment from now. The energy behind money flow index still strong without divergence yet, despite drop in prices
However, we would like to reiterate that investors should go for equities with intrinsic value, especially during this season that 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. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08028164085.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467