Volatility Continues As NSE Struggles For Direction As Traders Book Profit

Market Update for January 3

Trading on the floor of the Nigerian Stock Exchange on Wednesday remained very volatile, reversing previous day’s up market on the strength of losses suffered by highly capitalized stocks during the afternoon session as profit takers sold down their stake in Dangote Cement, Mobil Oil and Nigerian Breweries.
Trading started with upside gap up which lasted till midday before gradually pulling back by the afternoon after touching an intraday high of 38,543.28 to close lower than its opening point at 38,187.28 due to market sentiments for high cap stocks that recently rallied.
Market technicals was strong as volume increased, just as there was positive market breadth, indicating that players are taking position ahead of quarterly and full year numbers that are underway, especially the March accounts, where stocks like 7-Up, Honeywell Flour, Flourmills and International Brewery are expected to release their third quarter results this month. Numbers from the consumer goods sector before now have been impressive, following which the market has continued to take position ahead of their full year numbers.
This 2017 extended volatility in the market is giving insight into what should be expected in the major earnings reporting season kicking off any moment from now with Q3 numbers ushering in the earnings season, which would last from February to April. Within this period, discerning and smart investors would be rewarded with good returns on their investment at a time when dividend yields of more companies are expected to outperform returns on Treasury Bills and other fixed income securities. These are investors who recorded return on their investment above 21% per annum (or 5.25% for 90days).
This is why funds might flow out of other investment windows for quick returns from the few value stocks that have strong numbers to support dividend payout, despite the oscillation right now in the market. There is need for the Federal Government to enhance the positive macro-economic fundamentals which have so far reflected in the companies by taking necessary steps hasten the recovery process to boost growth and development.
Meanwhile, at the close of mid-week’s session, the Nigerian Stock Exchange’s composite All-Share index shed 77.51 points to close at 38,187.28, after opening at 38,264.87, representing a decline of 0.20% on above average traded volume.
Similarly, market capitalisation lost N27.58bn to close at N13.59tr having opened at N13.6tr.
This pushed its Year-to-Date returns into negative territory at 0.06%, just like market capitalisation for the same period was down by N18bn from its opening value.
Market breadth for mid-week remained positive and stronger as the number of advancers outpaced decliners in the ratio of 37:11 to continue the two day positive breadth, just as the number of advancers increased on a high buy volume.
Transaction volume and value for the day climbed by 137.87% and 18.80% respectively to 589.58m shares worth N2.12bn, from the previous day’s 248.17m units valued at N1.74bn. This was boosted by transactions in financial services sector and conglomerate stocks, especially in Skye Bank, Diamond Bank, FCMB, Fidelity Bank and Transcorp, which topped the activity chart as most traded equities by volume.
The benchmark index and few sectorial indices closed red, including the NSE Industrial and NSE Oil/Gas, while others closed green except for the NSE AseM that was flat.
Also, at the end of the day’s transactions, Diamond Bank led the advancers table with 9.55% to close at N1.72 per share, followed by FCMB with 9.49% to close at N1.73 each, while Double One (11) led the decliners table with a loss of 9.15% to close at N176.80; followed by Neimeth with 8.00% to close at N0.69. The top gainers were due to positive market forces and sentiments ahead of their full year earnings reports and low price attraction, while top losers were profit booking by traders to reposition.


This volatility trend may continue in today’s session but in the early hour of trading the market may struggle for direction as traders are likely to book profit from stocks hitting new highs, while repositioning for earnings reporting season will also continue as quarterly numbers of the companies reveal stronger numbers that support dividend payment.
However, we would like to reiterate that investors should go for value equities, 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 08032055467.
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Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467