October Market Roundup 2018
It was a horrible and volatile day on Nigerian Stock Exchange at the midweek, as the basic indicators- All-Share index and market capitalisation of the Nigerian Stock Exchange (NSE) gave up Tuesday’s consolidation. When it became apparent that there was going to be follow-through, that being the last trading session of October, the hopes of market players were dashed as the index closed day and month lower.
The mixed numbers released during the month impacted prices positively, although the scorecards came most times below market forecast, as investors took advantage of the low stock prices owing to prolonged pullbacks as funds exited emerging markets to develop economies. There were also factors like the continued hike in interest rate in the developed economies, just as the lingering political uncertainties surrounding Nigeria’s 2019 general elections, added to the weak economic fundamentals and negative sentiments, following which investors are running for safety.
Nigeria’s stock market tried to resist further decline in the period under review as trading and investing activities increased due to the earnings reporting season that created opportunities for bargain hunters to take advantage of low valuation and patterns for money making after suffering huge losses, due to changing market dynamics.
The NSE composite All-Share index started the month on a downtrend, but reversed up at midmonth, as Q3 corporate earnings started hitting the market with mixed reactions greeting the numbers as reflected in the up and down movement. This was after it touched the month’s high of 33,577.11 basis points, from lows of 32,326.90bps before finishing at 32,466.27bps on a higher traded volume.
The latest earnings reports reflect Nigeria’s present macro-economic indices- a seeming stagnation in the economy, a situation that is blamed on the present intense focus on politics at the detriment of the economy.
The expected Q3 GDP is likely to go the way of previous quarterly performance, keeping in mind that three consecutive quarters of decline will usher in recession.
Market behaviour and price action in the last nine months revealed the importance of seasons and cycles in equity investment. The ability of any investor to recognize these will determine the level of returns and success derived from playing the market. It is the action or behaviour of traders and investors during these times that produce patterns, making it easier for money making. Understand this market behavior and patterns and when they occur is therefore very important for success. You must have seen the impact of the just concluded earnings season on the market and equity prices.
The inability to understand and trade these patterns and cycles would mean that many will once more be left behind on a stock market recovery. John Templeton reputed as one of the great value and contrarian investors of all time, said: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Incredibly, after more than nine months of correction from the bull rally, the stock market continues to have a huge dose of uncertainty. Does this mean there is no signal that the market will come out this cycle soon if the political risk is out of the table?
The mixed performance in the period under consideration, reflected across all sectors of the market, as they closed marginally lower, with the NSE All Share index shedding 300.10bps to close at 32,466.27bps, from an opening figure of 32,766.37bps, representing a 0.92% decline. During the month, the index wavered between a low of 32,326.90bps and 33,577.11bps highs, before closing lower to remain below the 33,000 mark. Market capitalisation for the month fell by N109.56bn, closing at N11.85tr, from an opening value of N11.96tr, representing a 0.92% value loss as a result of last hour profit taking.
The oscillating trend recorded in the month was due to mixed sentiments and reactions to Q3 numbers presented, just as cautious trading among investors ahead of the 2019 general elections. The mixed economic data that emanated from the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS) within the period show that inflation rate sustained two months rise to 11.28% from11.23% in August. There was the rise in oil prices at the international markets, with oil selling above $78 per barrel, after touching a four-year high of $84 recently.
The month was a very volatile one, with improved participation that reflected on the high-volume traded, despite mixed sentiments, resulting in 11 trading sessions of bull-run and eleven sessions of down market. Traded volume for the month was up by 28.10% to 5.06bn shares, up from 3.95bn shares in the preceding month.
Market breadth for the month was negative with decliners outpacing advancers in the ratio of 68:36 to continue nine months of decline. There was however a slowdown in losses as many stocks reacted positively to their earnings.
Investdata sentiment reports for the month was negative, revealing a sell position of 89%, and buy volume at 11% of total transactions, while volume index for the period was 0.73.
Mixed Sector Performance
The period was largely bearish as more indexes were in red. Leading the month’s worst performing sectorial index was the NSE Industrial Goods index, which lost 6.15%, especially as earnings reports from the sector came below market forecast. It was followed by the NSE Consumer Goods index, shedding 4.59% to reflect the weak corporate earnings; followedby the Main-board, which shed 2.11% amidst investor selloffs due to mixed earnings performance from the general market. The NSE Insurance, NSE 30, NSE Corporate Governance and NSE Lotus II, shed 1.42%, 1.20%, 1.14 and 0.15% respectively.
On the other hand, the NSE Banking, Premium and Oil/Gas closed the month green, due the relatively better numbers posted by banking and oil companies within the month.
Best Performing Stocks
The financial service stocks topped the best performing stocks as they closed stronger on low valuation attraction and mild improvements recorded in their Q3 results. The highest gainers for the month was Fidelity Bank (READ MORE), which recorded 20% of its opening price, on the strength of positive market sentiment and better Q3 numbers; followed by Diamond Bank’s 19.49% notch; while Newrest ASL chalked 17.86%. Cadbury gained 9.89%; Forte Oil, 9.73% (READ MORE); Zenith Bank, 9.30%; Total Nigeria, 8.20%; Mutual Benefits, 7.14%; Sterling Bank, 6.67% (READ MORE);
|Best Performing Stocks in October|
Source; NSE and Investdata Research
Worst Performing Stocks
Cutix was the worst performing stock for the period after losing 50.49% of its opening price, due to price adjustment for bonus share of one ordinary for every one held and 20 kobo dividend. McNichols lost 43.06% on market forces and trend; followed by the 29.73% slide by Niger Insurance; while Honeywell Flour Mills, closed the month 26.30% lower.
|Worst Performing Stocks in October|
Source: NSE &Investdata Research
NSE ASI MONTHLY TIME FRAME FOR OCTOBER
The Composite NSE ASI action, from the above, has formed a bearish channel and at the same, a quadruple bottom which is opposite of the bullish “V,” where the market tested a strong support level of 32.326.90bps and resisted further decline on the strength of company financials that were released with period. The recent candlestick formation is a bearish sign, if the market has been trending up before now, this makes the situation look somehow, because there are no immediate factors that would redirect the market northward, given that the 2018Q3 earnings season has officially come to a close. The pullback is likely to continue as investors digest the numbers and reposition their portfolios ahead of December rally. A breakdown of the red trend line will confirm continuation of downtrend that will create more opportunity to buy low.
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