Volatility Still, As Investors Watch Nigeria’s Political Space Ahead Of 2019 Polls

Market Update for September 18, 2018
Volatile trading continued on the Nigerian Stock Exchange on Tuesday as the composite index had a turn-around to close higher, reversing Monday’s down market on positive sentiment, despite the lingering low confidence and liquidity levels. The losing streak has persisted over a long time, following which stock have become very attractive at the low risk entry prices for different investment horizons.
The market over the last few trading sessions is seemingly resisting further decline as many technical indicators reveal their oversold region that supports the fact that the market will bottom out in the nearest future.
Historically, the NSE’s performance in September over the past five years have been positive except for 2014, which this month could mimic, judging by the prevailing trends so far year-to-date. Factors already militating against the market, mostly the socio-political risks impacting Emerging markets since January 2018, due to rate hike and the trade war between the world’s two biggest economies- the U.S and China, has influenced the MSCI Emerging markets index which has fallen by 20%. The low risk entry point of the markets is likely to attract more funds and inspiring a turn-around.
With the current high oil price, ahead of Q3 earnings season and the shadow elections of Nigeria’s two major political parties coming up soon slated for September 26 and October 6 respectively for the ruling All Progressives Congress (APC) and Peoples Democratic Party (PDP), the main opposition. The shadow election for selecting candidates for the various elections in 2019, will give a clear direction as to how the presidential poll will play out, a situation that will guide early or late positioning in the market before and after the February 19, 2019 election.
Meanwhile, the NSE All-Share index started the day on a little downside in the morning, which was reversed in the mid-morning to afternoon on improved positive sentiment driven by bargain hunters that are taking advantage of low prices. Intraday high was 32,381.00 from its low of 32,180.72bps before closing the day even higher at 32,381bps on above recently traded average volume.
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Tuesday’s market technicals were positive, with high buying pressure on relatively high volume and positive market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 100% and ‘sell’ volume at 0%. Volume index was 1.20 of the day’s total transactions.
The energy behind the day’s market performance was strengthened despite the prevailing weak situation, as shown in the money flow index at 25.37bps, up sharply from previous day’s 16.04bps, indicating that funds are entering some stocks and the market gradually in the midst of low liquidity.

Index and Market Cap
The benchmark index on Tuesday chalked 179.02 basis points, closing at 32,381bps, after opening at 32,201.98bps, representing a 0.56% growth, just as market capitalisation was up a further N65.35bn to close at N11.82tr from N11.8tr, representing 0.56% value gain.
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The upturn was due to price appreciation in medium and high cap stocks, especially banking like: Stanbic IBTC, Zenith Bank, UBA, FBNH, Nestle, Forte Oil and Dangote Sugar, among others. This impacted positively on the NSE’s Year-to-Date return, reducing the loss to 15.33%, while market capitalization for same period is down N1.79 trillion, or 13.14% from the year’s opening value.

Bullish Sectoral Performance
The sectors indexes were largely bullish for the day except for NSE Insurance that closed red amidst uncertainties as operators begin the jostle for funds to enable them meet the new three-tiered minimum capital bases prescribed by the industry’s primary regulator- the National Insurance Commission (NAICOM).
Market breadth was positive with advancers outnumbering decliners in the ratio of 27:18, even as market activities in volume and value terms rose 67.95% and 23.32% respectively, after 267.81m shares worth N2.65bn were traded. On Monday, 160.67m units valued at N2.15bn changed hands, largely driven by financial services stocks.
First Aluminum and Prestige Assurance were the best performing stocks, topping the advancers’ table after chalking 10% and 9.82% respectively to close at N0.33 and N0.57 each respectively, purely on their low-price sentiment. On the flip side, Redstar Express and Cornerstone Insurance were the worst performing, shedding 9.90% and 8.9% of their opening value respectively to close at N4.50and N0.21 on market forces.

Market Outlook
We expect the market to continue in this direction over the next few days, ahead end of the quarter rally that will usher in Q3 earning season in October, in the midst of rising oil and expected new policy statement and reform to stimulate the economy again. The ongoing volatility is likely to persist as bargain hunters take advantage of the low-price regime, in the midst of continued selloffs and political risk, especially as shadow elections by political parties kick off any moment from now.
Meanwhile, 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

Tel: 08028164085, 08032055467

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