Sustained Volatility As Investors Take Profit, Reposition For Earnings Season

Market Update for January 2

The first trading session of 2018 was highly volatile, closing positive after opening with sharp gap down that lasted till midday, recording almost 549 basis points’ decline before it rallied back by the afternoon on the strength of price appreciation of some stocks, as traders and investors began taking position ahead of early filer reports likely to hit the market this month. This was especially the case for companies billed to file their third quarter earnings for March year end accounts, while December full-year accounts are underway, especially from Forte Oil, Nigerian Breweries, United Capital and Nestle, which results are expected to be in the market latest in February, given that their accounts do not require approval by a primary regulator like the banks and their insurance cousins.
The January effects may not be much this year as market structure had changed with more foreign investors playing the market heavily, controlling over 62% of transactions, leaving the remaining for Pension Fund Administrators and domestic institutional players, while retail investors are seemingly left with the crumbs and having minimal impact to affect the market’s direction. The sale of their shares to meet personal financial obligations, including school fees and house rent at this time of the New Year would therefore have minimal effects, following which the positive disposition of the market is likely to be sustain on a continued volatility in expectation of quarterly and full year scorecards for listed companies.
Market technicals for the day was mixed as market breadth was positive on a decline volume that signal accumulation of smart money in the market after a downside in the morning and rallied back above the opening figure to touch intraday highs of 38,264.7 from lows of 37,678.34 but retraced back above 38,000 psychological line to keep the positive uptrend momentum.
The continued appreciation of the Naira and oil price remaining above $60 per barrel on Tuesday in the international market, well above the 2018 budget benchmark of $45pb, meaning there is already surplus to fast-track some projects that will boost the recovery and growth recorded so far.This is a plus that would further push up government’s revenue, while enhancing the nation’s foreign reserves, despite the 1.8m barrels per day production cap set by the Organisation of Petroleum Exporting Countries (OPEC).
Meanwhile, the Nigerian Stock Exchange’s All-Share index inched up by 21.60 basis points to close at 38,264.79, from the 38,243.09 points, representing a 0.06% growth, just as market capitalisation moved in the same direction, climbing up by N7.69bn to close at N13.7tr, from previous day’s N13.69tr, representing a 0.06% value growth. The upturn recorded resulted from appreciation in the prices of stocks such as: Nigerian Breweries, PZ, UBA, Dangote Sugar, Zenith Bank, Access Bank, CAP, Fidelity Bank Fidson, Nascon, International Brewery and Honeywell Flour Mills. These impacted positively on the ASI’s year-to-date returns, to 0.06%, just as Year-to-Date growth in market capitalisation stood at N7.69bn, representing a 0.06% rise over the year’s opening value.
Market breadth for the day was positive as the number of advancers outpaced decliners in the ratio of 27:13 on a relatively low traded volume that was lower than last trading day of 2017 level.
Transactions in terms of volume and value were down by 55.72% and 74.12% respectively to 248m shares worth N1.74bn from previous day’s 561m units valued at N6.89 billion. The day’s activity was driven mainly by shares of Transnational Corporation of Nigeria (Transcorp), Zenith Bank, Skye Bank, FCMB and Access Bank, which topped the volume chart.
Biggest gainers for the day were FCMB and Chemical & Allied Products which topped the advancers table, chalking 6.76% and 5% respectively to close at N1.58 and N35.70 on positive market forces.
On the flipside, NEM Insurance and Ecobank Transnational Incorporated shed 4.82% and 4.29% to close at N1.56 and N16.27 respectively on profit taking activities of investors.


Being the mid-week and second trading day of 2018, expect volatility to continue on Wednesday as traders take profit and reposition for the weeks and months ahead. Meanwhile, smart money could continue their accumulation of shares in value stocks ahead of the 2018 earnings reporting season. The positive outlook for emerging market in the New Year as a result of high commodities price is a major attraction as currencies and exchange of these developing markets are relatively stable. This is in addition to undervalued assets in these exchanges.
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 08032055467.
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Ambrose Omordion
CRO | Investdata Consulting Ltd
Tel: 08028164085, 08032055467