After Thursday’s Fake Market Move, Investors Seek Direction On NSE

Market Update for May 17, 2018

The Nigerian equity market continued wavering amidst sustained volatility on Thursday indicating that the rebound in the previous day’s trading session was a fake market move as profit booking persisted on a high traded volume to close the day lower.
The day’s trading session opened slightly higher in the morning before sell-off ensued among the highly capitalized stocks that sharply pulled back the benchmark index from intraday highs of 41,003.76 basis points to lows of 40,675.89bps by the afternoon, before finally closing lower at 40,651.41 to remain under the downtrend line into the weekend.
The sharp change in investors sentiment as revealed by investdata daily sentiment reports shows a selling pressure of 93% from the previous day buying position of 100%, despite the positive influx of economic indices and news that complemented the earlier corporate earnings that beat market expectation. As we have said before now, it is the interpretation or analysis given to the 2019 elections by the foreign players in the market that will determine direction irrespective of the stronger economic and company data.
Also, there is the recent reawakening of the fiscal authorities with plans to pay contractors debt, added to Thursday’s announcement of an approval for a Presidential Infrastructure Development Fund (PIDF) expected to drive key infrastructure like roads and power with direct impact on the system (READ).
Thursday’s market technicals were negative as volume traded was high in the midst of negative market breadth, with selling pressure of 93%, while buying volume stood at 7% on a volume index of 1.15 of the day’s total transactions. The bear sentiment has been rising in recent times since the correction started and on Thursday reflected in the money flow index which stood at 54.67bps from previous day’s 63.99bps. This is an indication that funds are weak to drive prices and at the same time signaling exit of money from the market.

Index and Market Cap
The All-Share index shed 341.56bps to close at 40,651.41bps, after opening at 40,992.97bps, representing a 0.83% decline on a high volume that was higher than the previous day’s. Similarly, market capitalisation lost N123.72bn to close at N14.74tr from an opening value of N14.9tr, also representing 0.83% depreciation in value.
The downturn was due to profit taking in high cap stocks like Dangote Cement, Nigerian Breweries, Fidelity Bank, Cement Company of Northern Nigeria, Seplat, Lafarge Africa, Access Bank and NEM Insurance. These impacted adversely on the NSE’s Year-to-Date returns, to contract to 6.30%; while market capitalisation gain for the period stands at N1.12tr, of 8.20% above the year’s opening value.

Bearish Sector Performance
The sectorial performance for the day were largely bearish, except for NSE Oil/Gas that was up marginally by 0.01% due to Forte Oil price appreciation. Other indices were down as result of profit taking in NB, Dangote Cement, Access Bank, Lafarge Africa, NEM and Equity Assurance.
Market breadth remained negative as decliners outweighed advancers in the ratio of 27:18 to reverse the previous day up sessions.
Market activities were up in volume and value by 63.54% and 73.625 respectively to 424.37m shares worth N7.56bn from the previous day’s 259.49m units valued at N4.36bn. Transaction volume was boosted by financial services stocks like Zenith Bank, Access Bank, FCMB, Niger Insurance and Fidelity Bank which witnessed increased trading to top the activity chart.
The best performing stocks for the day were Sovereign Trust Insurance and Custodian, which topped the advancers’ table gaining 9.10% and 5% respectively to close at N0.24 and N5.25 each. This was due to market sentiments and forces
On the flip side, CCNN and Sterling Bank were the worst performing, losing 5.3% and 4.9% respectively to close at N27.10 and N1.55 each purely on profit booking.

Market Outlook
We expect sustained trend of profit taking being the last trading day of the week ahead of next week’s Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting, as bargain hunters take advantage of low prices in the midst of volatility on the strength of company and macro-economic data so far in the year. In the face of positive economic news of plans by the fiscal authorities seek National Assembly approval to settle contractors’ debt and the launch of the PIDF, which will impact economic activities. We expect Q1 GDP to further confirm the state of the economy and give direction.
Investors should not panic out of their position but watch events as it unfolds.
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.
Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the Chart Summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.
Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO| Investdata Consulting Ltd
Tel: 08028164085, 08032055467