Market Update for the week ended March 22 and Outlook for March 25-29
Despite Friday’s positive close, the basic indicators of the Nigerian Stock Exchange (NSE), last week maintained a negative outing as corporate earnings came mixed. Of particular note was NASCON Allied Industries in the consumer goods sector, which came below expectation, but reflected the weak purchasing power of Nigerians (READ MORE), while that of Julius Berger and 11 Plc in the construction and petroleum marketing sectors were nonetheless impressive, laced with offers of juicy dividend payouts.
There were four trading sessions of selloffs in highly capitalized stocks subsided on Friday, when bargain hunting activities increased in the last minutes, helping the benchmark All-Share index resist further decline. There was after two consecutive weeks of pullbacks when it touched intra-week low of 30,856.23 basis points from an opening level of 31,156.47bps before closing marginally lower at 31,139.39 points on a high buying pressure.
With the mixed corporate earnings and recent economic data that emanated from the National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) showing slow economic growth in 2018 and Gross Domestic Product of 1.9% (READ); the largest expansion in three years post- recession.
With the exit of smart money from the equity market after the Presidential and National Assembly elections, its indicators have remained on the decline, even as the seeming renewed interest of foreign investors in the money and fixed income markets was due to the high rates, driven by stability in the exchange rate. This has been supported by the robust external reserves and the tight monetary stance in advanced economies, as well as assurance by the U.S that there would be no rate hike for the rest of this year, while the European Central Bank intends to sustain monetary stimulus as a way of propelling growth.
Daily Movement Of NSEASI
Back to the market, the composite NSE index opened the week on a negative note, losing 0.06% on Monday, due to sell pressure in banking stocks, a situation that was sustained until Thursday, with the market shedding 0.14%, 0.13% and 0.50% respectively, before Friday’s 0.82% recovery on a renewed buying interest. The recovery was nonetheless significant, as it reduced the week’s total loss to 0.01% amidst mixed sentiments, compared to the previous week’s 2.34%.
Low and medium cap stocks dominated the advancers’ table during the period under consideration as highly capitalized equities suffered losses on selloffs and price adjustment for dividends declared. This selloffs were mainly in consumer goods, oil/gas and insurance sectors as investors and traders trade cautiously as low liquidity and confidence continue to weigh on the market.
The momentum behind the week’s performance was weak and slightly down during the period under review, as reflected in money flow index at 44.97 basis points, compared to 45.04bps in the previous week, an indication of cautious trading in the midst of funds exiting the market, as well as the high buying pressure of 94% for the period under review.
Equity Indicators Last Week
At the trading forthe period All Share Index shed marginal 3.37bps and closed at 31,139.35bps after opening at 31,142.72bps, representing 0.01% decline. The losing momentum for the week was reduced by high buying pressure as revealed by Investdata’s weekly sentiment report showing 94% buy position and 6% sell volume on a transaction volume index of 0.87 points.
Similarly, market capitalization was down by N1.3bn, closing at N11.6tr, from an opening value of N11.61tr, representing 0.01% value loss, which impacted mildly on the NSEASI’s year-to-date negative position to 0.93%.
NSEASI Weekly Time Frame
The NSE index pulled back slightly during the week on a high traded volume to resist further decline on a positive sentiments, as the index traded above its 20-Day Moving Average, after testing the support level of 30,856.23bps.
Mixed Sectors Indices
The sectoral performance indexes for the week were largely bearish, except for the NSE Banking and Industrial Goods which closed higher at 3.82% and 2.42% respectively. The Oil/Gas index closed red due markdown in the share price of Seplat Petroleum Development Company and profit taking in Total and Forte Oil; just as a sell down in Cadbury and Nigerian Breweries pulled down the Consumer Goods index for the period. Market breadth for the week was negative, with decliners ’outnumbering advancers in the ratio of 38:32, as in previous week’s down market.
Market activities were mixed as volume was up 8.26% to 1.18bn share, compared with 1.09bn units in previous week, while value slipped 8.38% to N12.13bn, from N13.4bn, as investors await economic policy direction and the outcome of the second two-day meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) which begins Monday, March 25.
McNichols and Access Bank were the best performing stocks during the week, topping the advancers’ table with 22.81% and 18.10% gains respectively, closing at N0.70 and N6.85 per share on 5 kobo dividend and expected impact of the ongoing integration with Diamond Bank Plc. On the other hand, Cutix and Cadbury suffered losses of 17.78% and 17.50% respectively, closing at N1.85 and N9.90 on profit taking, in apparent investor reactions to the financials published by the beverage giant, which also announced the appointment of a new Nigerian Managing Director and Finance Director, 13 years after the exit of the last occupants (READ).
During the week also, the share price of Stanbic IBTC Holdings was adjusted for a final dividend of N1.50.
Market Outlook
We expect mixed performance in the week as more earnings are likely to hit the market being the last trading week of march and official close of December 31, 2018 full year earnings reporting season, as investors await MPC meeting outcome with their gaze on government’s policy direction and the prevailing low market liquidity in the face of ongoing earnings reporting season, vis-à-vis market and economic fundamentals.
As major blue chips stocks prices had drop in recent weeks, we expect speculative trading to shape the market direction in the next trading week.
The volatility witnessed last week, was driven by traders and investors repositioning ahead of dividend declaration by major listed companies.
The ongoing volatility will continued as investors and fund managers rebalance their portfolios, with eyes fixed on political space and ongoing full year company earnings position and post-election market dynamics. 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 our advice 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 low in the midst of mixed company numbers, weak economic and market fundamentals.
Meanwhile, we greatly appreciate participants in the Abuja Invest 2019 Post-Election Bulls & Bears held on Saturday, March 23.
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The workshop is scheduled as follows:
FEE: N10,000
DATE: April 13, 2019
TIME: 10am – 4.00pm
VENUE: Emerald Hotel, 193, Aba Road Rumuola, Port Harcourt, Rivers State.
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• Jump out of profit position out of fear
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Registration is ongoing
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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
