Market Update for June 19, 2018
Nigeria’s equity market started the new trading week Tuesday with a loss, continuing three trading sessions of pullbacks, after the holidays declared by the Federal Government, Friday and Monday, to mark the end of the Islamic month holy month of Ramadan.
The Nigerian Stock Exchange (NSE) therefore joined its counterpart around the world to close lower on trade war tensions resulting from tariffs imposed by the U.S, on goods from other countries, which are warming up to retaliate. This is directly and indirectly threatening global investments, because trade drives investment and confidence in the world today.
Also, the continued rate hike in U.S has further put pressure on emerging markets like Nigeria, as the US$ strengthens as commodity prices continue looking up in the international market, while crude oil price remains above $70.
Smart money continues to exit the market for higher yield investment and more predictable environments, a factor that continues to reflect on institutional money flow in the last five months, compared to the situation in 2017 when yield on the 10-year U.S Treasury instrument was 2.27%. Today, is it almost 3%, triggering capital outflows from developing economies.
The NSE’s benchmark All-Share index opened on Tuesday by gapping downside on the extended bad tariff news in the early morning session, which was sustained until midday, hitting intraday lows of 38,616.91 basis points, after opening high at 38,928.02bps, before rallying back marginally by the afternoon to close the day at 38, 664.15bps.
This was despite the positive economic data and expected signing of the much delayed 2018 Appropriation Bill by President Muhammadu Buhari on Wednesday, June 20, 2018.
Tuesday’s market technicals were negative and weak as traded volume was higher in the midst of negative market breadth and high sell pressure while hot money exited positions. Investdata’s Daily Sentiment Report shows that selling volume was at 85%, while buying interest was 15% on a volume index of 1.16 of the day’s total transactions.
The momentum behind the selling sentiment for the day reflected in the money flow index at 28.86 points from the previous day’s 29.35 points, which is an indication that funds exited the market, as traders sell-off their position in medium and high cap stocks to cash out on short term profit taking. Investors are expected to take advantage of the pullback to position for dividend as release dates for March year-end accounts draw closer, as domestic institutional investors take position on low valuation and high dividend yield of fundamentally sound stocks.
Index and Market Cap
At the close of Tuesday’s session, the NSE’s benchmark index shed 264.32bps to close at 38,664.15bps, after opening at 38,928.02bps, representing a 0.68% decline on a high volume that was higher than the previous day’s. Similarly, market capitalisation was down by N95.75bn to close at N14.01tr from an opening value of N14.1tr, which also represented 0.68% value loss, halting the seeming recovery.
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The downturn recorded were due to losses suffered by medium and high cap stocks like Guaranty Trust Bank, Zenith Bank, UBA, FBNH, Stanbic IBTC, Flourmills, Unilever, Access Bank, Forte Oil, Oando, Honeywell Flour, and Fidelity Bank. These impacted negatively on the NSE’s Year-to-Date return to contract at 1.10%; while market capitalisation gain for the period stood at N401.5bn, representing 2.68% above the year’s opening value.
Bearish Sector Performance
Sectorial performance for the day were largely bearish, except for the NSE Consumer index that was up as a result gains by Nigerian Breweries and International Brewery, which appreciated in value. Others sectoral indexes were down, including CCNN, Conoil, Betaglass which were adjusted for dividend proposed by their directors, in addition to sell-offs in banking stocks, especially GTBank, Zenith Bank, UBA, Stanbic IBTC, FO, Wapic and Prestige.
Market breadth for the day was negative as decliners outnumbered advancers in the ratio of 34:12 to halt the two-day up market.
Market activities were up in volume and value by 16% and 16.57% respectively to 390.47m shares worth N6.12bn from the previous day’s 336.62m units valued at N5.25bn. The day’s volume was boosted by trading in financial services and industrial stocks like UBA, Zenith Bank, Access Bank, CCNN and GTBank that witnessed increased trading to top the activity chart.
International Brewery and Japaul Oil were the best performing stocks that topped the advancers’ table, with 6.54% and 5.29% respectively to close at N44.00 and N0.40 each. This was as a result of market sentiment and forces.
On the flip side, Prestige Assurance and Union Diagnostic were the worst performing, losing 6.25% and 5% respectively to close at N0.60 and N0.38 on short term profit taking and market forces.
Market Outlook
We expect the trend to slow down as March account earnings reports start to hit the market. Volatility is likely to continue as investors and fund managers reposition for end of the quarter to earn good fee and commission as equities remain undervalued with higher yields. Investors should review their position in line with their investment goals and take action as events as it unfolds in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value, especially during this season were less earnings are released ahead of march full year earnings release and Q2 interim dividend payment are expected in the market arena very soon.
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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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
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