Investors Await Q2 Earnings Reports, As Market Searches For Direction

Market Update for July 10, 2018

 

Tuesday’s trading on the floor of the Nigerian Stock Exchange was difficult and volatile, as shown in the market breadth and up/down volume that was mostly negative. Activities opened on the downside, a situation that was sustained until the closing gong as the benchmark All-Share index breaking down the recent strong support level of 37,451.08 on a low volume traded.

Within the session, the NSE ASI made an intraday low of 37,422.84 basis points, from its high of 37,647.93bps, as it closed below opening figure, after highly capitalized stocks suffered losses due to the sustained economic slowdown that is further worsened by insecurity across the country, which is likely to affect the farm outputs. There is the possibility of this reversing the gains recorded over the past 16 consecutive months in inflation as it declined, because of the farmers-herdsmen crisis, leading to food shortages in the system.

The situation is made worse by the fact that government is gradually shifting to politics ahead of 2019 general elections, the first set of which holds in February (Presidential election). This is already causing fear among investors who are becoming careful as they trade with cautious, notwithstanding the onset of the Q2 earnings season that kicks off expectedly, next week. But then, this weekend’s gubernatorial election in Ekiti, followed by that of neighbouring Osun before year end, is bound to set the tone for what to expect next year. It is a straight battle between the ruling Peoples Democratic Party, led by the incumbent Deputy Governor Olusola Eleka, backed by his boss, Governor Ayodele Fayose and Kayode Fayemi, who is seeking a return to a position in left after a single four-year term in 2014. Until now, Feyemi was Minister Of Solid Minerals Development.

 

Tuesday’s market technicals were negative with low traded volume in the midst of negative market breadth and sentiments, as revealed by Investdata’s Daily Sentiment Report showing a ‘selling’ pressure of 100% and ‘buy’ position for the day was 0% on a volume index of 0.63 of the day’s total transactions.

Impetus behind the market performance for the day were weak as reflected on the money flow index at 34.29 points, up from the previous day’s 33.77 points, an indication that funds are still in the market, but very low due to cautious trading as traders and investors maintain their wait-and-see attitude. The old economy stocks which are blue chips will bounce back, moreover new economy stocks that are growth equities should start outperforming the general market as technology and innovation are driving perception and performance.

 

Index and Market Cap                                       

 

At the close of trading, the benchmark index shed 225.09 basis points, closing at 37,651.89bps, after opening at 37,651.89bps, representing a 0.60% decline, just as market capitalisation lost N82.2bn to close at N13.56tr, from an opening value of N13.64tr, also representing 0.60% value loss to further again deepen investors negative position.

If you are haven’t joined Investdata Buy & Sell Signal setup, where you can look over our shoulder and follow to know when to hold cash and take advantage of the watchlist of stocks for different investment purposes that you may position in, as the market oscillate. To register and become a member send Yes or stocks to the phones numbers below. Our watch list has increased due to the prolonged correction before now, take advantage of this service to buy right and sell right.

The day’s downturn was due to price decline generally, particularly in stocks like Nigeria Breweries, Total, Guaranty Trust Bank, Zenith Bank, Seplat, Lafarge Africa, , Dangote Sugar,  Flourmills, ETI and Honey well. These impacted negatively on the NSE’s Year-to-Date return, to deepen the loss position to 2.15%, while market capitalisation loss stood at N5370 billion, same as 0.39% below the year’s opening value.

 

Bearish Sector Performance

It was a bloody session as sectorial performance indexes all closed red. The NSE Oil/Gas and Insurance took the lead with 2.55% and 2.23% loss. Market breadth was negative as decliners outnumbered advancers in the ratio of 27:12 to reverse Monday up market.

Market activities were up in volume and value by 37.4% and 88.86% respectively at 213.2m shares worth N3.76bn, from the previous day’s 155.17m units valued at N1.99bn. Volume was boosted by trading in financial services and conglomerates stocks like Zenith Bank, FBNH, Transcorp, GTBank and Sovereign Trust Insurance that witnessed increased trading to top the activity chart.

Forte Oil and Custodian Investment Plc were the best performing stocks that topped the advancers’ table after chalking 9.94% and 9.4% respectively to close at N29.85 and N5.70 each, due to their low-price attraction and expectation of interim of dividend.

On the flip side, Mutual Benefits and Multiverse were the worst performing, losing 9.09% each to close at N0.40 and N0.20 on market forces and profit booking.

 

Market Outlook

 

Reversal imminent as Q2 earnings season kicks off any moment from now, since equities remain undervalued with higher yields. Investors should review their position in line with their investment goals and take action as events 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 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.

 

Ambrose Omordion