Market Update for September 27, 2018

There was an extension of downtrend for the second consecutive trading session on Thursday, closing lower, on a reduced trading volume ahead of Friday, the last trading session for the month/quarter, which is likely to further decline, despite the increased tempo of notification of close period for Q3 earnings reports by many companies.
The bargain hunting induced rebound due to low stock valuations after many listed companies hit their 52-week low, revealing huge intrinsic value of the stocks.
The political risk had earlier shaped the market and the economy in the prevailing bearish ascendance and deteriorating economic position, especially giving the unfolding events that played out at the two recently concluded governorship elections held in Ekiti and Osun States had cast a shadow into what will happen in 2019 general poll and thereby eroding the confidence of free and fair elections.
The NSE’s composite All-Share index opened Thursday on a downside movement in the morning session, which was sustained on a sell-off till midday to afternoon, touching intraday low of 32,684.66 basis points from a high of 32,983.99bps, before bouncing back to finish at 32,763.35bps. The market did not close well despite MACD crossed over the signal line to bullish zone which supports an upturn in short-term, because more stocks shed value at the end of the day trading session.

NSE DAILY TIME FRAME MACD CHART

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The session’s market technicals were negative as selling pressure remained high on low traded volume and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 74% and ‘buy’ position at 26%. Volume index was 0.66 of the day’s total transactions.
Market momentum behind the day’s performance was flat, regardless of the continued profit taking, as shown by the money flow index at 57.66bps, up slightly from previous day’s 57.52bps, indicating that funds are the market during the session despite prevailing low liquidity.

Index and Market Cap
The All Share Index slipped further at the end of trading, shedding 199.92bps or 0.61% to close at 32,763.35bps, after opening at 32,963.27bps, just as market capitalization dropped by N72.99bn, or 0.61% to close at N11.96tr, from an opening value of N12.03tr.
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The day’s downturn was impacted by profit taking in low, medium and high cap stocks like: Nestle, Guaranty Trust Bank, CCNN, PZ, UBA, Access Bank, Honeywell and Dangote Sugar, among others. This impacted negativelyon the NSE’s Year-to-Date return, swelling the loss position to 14.33%, while market capitalization for same period had fallen to N2.29 or 12.19% from the year’s opening value.

Bearish Sectoral Performance
The sectorial indexesfor the day were largely bearish, except for the NSE Insurance and Oil/Gas that closed higher, amidst traders booking profit on banking stocks and positioning in low priced stocks that made insurance to dominate the top gainers for the day.
Market breadth was negative as decliners outnumbered advancers in the ratio of 21:13, to continue the bearish transition. Market activity in volume and value were mixed as volume was down by 10.46% to 154.29m shares from previous day’s 172.2m units while value went up by 32.99% from N2.05bn to N2.73bn. This transaction was largely driven by financial services stocks like: Fidelity Bank, Guaranty Trust Bank, UBA, Access Bank and Zenith Bank.
First Aluminum and Royal Assurance were the best performing stocks that topped the advancers’ table with 10% each to close at N0.44 and N0.22 each respectively, due to market forces. On the flip side, ABC Transport and PZ Cussons were the worst performing, losing 9.9% and 4.81% respectively to close at N0.30 and N12.85 on market forces and profit booking.

Market Outlook
We expect the market volatility to continue being the last of the week/month/quarter that will usher in the Q3 earning reporting season in October. We are in a season of rising political uncertainties and oil price, were economy has no clear direction and reform policy to stimulate activities that will drive growth.
The recent pullback is creating opportunities for traders and investors to take advantage of the low-price regime to position for expected third quarter earnings reports, in the midst of continued selloffs and political risk, especially as shadow elections by political parties kick off any moment from now.
Already, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space.
Meanwhile, analysing the actual numbers released has given basic insights into company earnings that are likely to drive prices and determine market valuation.
Investors should review their positions in line with investment goals, vis-à-vis strength of 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 volatile amidst mixed company,economic and market fundamental.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
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