Volatility Persists As Profit Taking, Bargain Hunting Dominate NGSE Ahead Q3 Season

Market Update for October 3, 2018

Trading activities on the Nigerian Stock Exchange remained volatility at midweek, extending its back-to-back losing string, amidst persistent profit booking in blue-chip stocks, thereby creating more entry opportunities for bargain hunters ahead of Q3 earnings reporting season.
The NSE Composite index started out the day early when it gapped down, pulling back to support in the mid-morning to afternoon session. It then started to roll up, took out one layer of resistance, after reaching the day’s low at 32,434.67 basis points, from intraday highs of 32,728.72bps with about 30 minutes left, and then bounced into the close at 32,454.03 on very low traded volume.
The market technicals for the day were negative and mixed with high selling pressure, low volume traded and positive market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ position of 93% and 7% ‘buy’ volume. Volume index was 0.61 of the day’s total transactions.
The energy behind the day’s market performance was strengthened, despite profit taking that led to day’s decline. The seeming strength returning to the market reflected in the money flow index at 58.41bps, from previous day’s 56.22points, indicating that funds entering some stocks ahead of the earnings season and last quarter repositioning of portfolios in the midst of low liquidity in the market.

Index and Market Cap
At the end of the day’s trading, the NSE benchmark index shed 257.62bps, closing at 32, 711.65 basis points, after opening at 32,711.65bps, representing a 0.80% decline, just as market capitalization went down N94.05bn, to N11.85tr, from an opening value of N11.94tr, which as represented a 0.80% depreciation in value.
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Meanwhile, midweek’s downturn was impacted by price depreciation of high cap stocks like: Dangote Cement, Nigerian Breweries. Unilever, ETI, Access Bank, FBNH and UBA, dragging the NSE’s Year-to-Date negative return further down to 15.14%, while market capitalisation lost N1.94tr, representing 13.05% from the opening value.

Bearish Sectoral Performance
Sectorial performance for the day was bearish, except for the NSE Banking that closed higher. Market breadth was positive as advancers slightly outnumbered decliners in the ratio of 15:14, to continue the bearish transition.
Market activities in volume and value were up by 25.93% and 39.92% respectively to 136.73m shares worth N1.42bn, from previous day’s 184.59m units valued at N2.38bn.
Transactions were boosted by trading in financial service stocks like: FCMB, UBA, Fidelity Bank, Access Bank and Zenith Bank.
Diamond Bank and Cutix were the best stocks as they topped the advancers’ table, gaining 5.1%and 4.9% respectively to close at N1.24 and N4.30 per share, purely on market sentiments and bonus issue of one-for-one. On the flip side, Niger Insurance and Mutual Benefits lost 8.82% and 7.14% respectively, closing at N0.31 and N0.26 each on profit taking and market forces.

Market Outlook
We expect the market to remain volatile as profit taking and bargain hunters interplay the market ahead of Q3 earnings reporting season that kicks soon, in the midst of political risk especially with primaries ongoing across the country.
Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers that will give insights into expectations for Q3 GDP and full year companies earnings power that are likely to drive prices and determine the market before or after February election.
Investors should review their positions in line with investment goals, strength of the 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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