Portfolio Rebalancing Likely, As Investors Await March Year-end, Half Year Accounts

Portfolio Rebalancing Likely, As Investors Await March Year-end, Half Year Accounts

The Nigerian Stock Exchange had yet another positive trading session, reversing previous day’s down market, kicked starting the week with increased buying interest that boosted transaction volume, amidst continued repositioning value-laden stocks by traders and investors. This has supported the recovery move in the past one week.

The day started with a gap up at the opening which was sustained till the mid-morning and into noon, following which the benchmark NSE All-Share index hit intraday highs of 38,856.06 from the low of 38,649.41 points. There was however a slight pullback in the afternoon session as the index closed for the day at 38,845.31 on a positive market breadth.

The positive performance of the market is coming amidst new economic data showing that the Nigerian economy is still robust and upbeat, helped by the sustained oil production, helped by peace in the Niger Delta at a time oil price remain high. Therefore, helped by the contribution of oil production and sales, the nation recorded balance of trade surplus in the first quarter of 2018, according to data by the National Bureau of Statistics (NBS) last week. Also, we note recent steps by the fiscal authorities to speed up economic recovery, as the House of Representatives passed approved the government’s plan to issue Promissory Notes to settle contractor’s debts, among others.

However, the continued delay by President Muhammadu Buhari in signing the 2018 Appropriation Bill passed into law last month by the National Assembly is a sore point in the economic recovery drive which is key to the administration’s Economic Recovery & Growth Plan (ERGP).

Market technicals for the day were positive and strong as traded volume was huge in the midst of positive market breadth and strong demand for stocks.  Investdata daily sentiment reports reveals that market players are buying, with pressure at 95% and selling volume- 5% on a volume index of 1.81of the day’s total transactions.

The force behind the buying sentiment for the day slowed down marginally as reflected in the money flow index at 24.26 points from the previous day’s 25.92 points, which is an indication that profit takers are holding funds. Meanwhile, investors and traders demand for medium and high cap stocks remain high.

Index and Market Cap

The composite index on Monday gained 176.08 basis points to close at 38,845.31bps, after opening at 38,669.23bps, representing a 0.46% growth on a huge volume that was higher than the previous day’s. Similarly, market capitalisation was up by N63.79bn to close at N14.07tr from an opening value of N14.01 trillion, which also represented 0.46% value gain that further moved the year-to-date position into green.

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The upturn recorded at the end of Monday trading session was driven by price appreciations in   low, medium and high cap stocks like Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, FBNH, Access Bank, Flourmills, Oando UBN, Dangote Flour, and Honeywell. These impacted positively on the market and raised the NSE’s Year-to-Date gain to 1.57%; while market capitalisation gain for the period stood at N461.9bn representing 3.39% above the year’s opening value.

Mixed Sector Performance

Sectorial performance was mixed as NSE Industrial and Oil/Gas closed in the red, while other sector indexes closed green and in the same direction with the general market. NSE banking index led the best performers with 1.05% due to value gained in Guaranty Trust Bank, Zenith Bank, UBN and Access Bank, followed by the NSE insurance and Consumer goods as Equity Assurance, Aiico, Niger Insurance, National salt, Flourmills and Nigerian Breweries appreciated in price.

Market breadth was positive with advancers outweighing decliners in the ratio of 30:20 to halt last Friday down market.

Market activities were mixed as volume was up by 187.19% to 603.17m shares from the previous day’s 210.03m units, while value was flat at N3.89bn. The day’s volume was boosted by trading in financial services, consumer goods and hotel services stocks like Ikeja Hotel, United Capital, Africa Prudential, Dangote Sugar and Access Bank that witnessed increased trading to top the activity chart.

National Salt and Diamond Bank were the best performing stocks that topped the advancers’ table, with 7.14% and 6.6% respectively to close at N24.00 and N1.62 each. This was as a result of improving earnings and low price attraction.

On the flip side, Berger Paints and BOCGAS were the worst performing, losing 5% each to close at N8.55 and N4.21 on profit taking.

Market Outlook

We expect the trend to slow down due to profit taking ahead of the forthcoming long holiday. Volatility is likely to continue as investors and other players rebalance their portfolios for March full-and half year earning season as equities remain undervalued with higher yields. Investors should review their position in line with their investment goals and take action as events as it 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 less earnings are released ahead of march full year earnings release and 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

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