Gradually, Investors Take Advantage Of NGSE’s Low Price Regime, Await Q2 GDP Data

Market Update for August 16, 2018
The Nigerian Stock Exchange (NSE) continued bleeding on Thursday, as the free fall of equity prices persisted, owing to factors that we have shared repeatedly on this platform as those militating against the market and the economy. So strong and compelling are these negative influences on the market that investors seem to have forgotten about the strong fundamentals of these companies and the recent interim dividends paid by those in the banking sector. Of particularly note are: Zenith Bank, Guaranty Trust Bank and, capped on Thursday by Stanbic IBTC Holdings offer of N1.00 dividend per share, the highest so far, as contained in its impressive Q2 numbers. Last year, the group paid 50 kobo as interim dividend.
Besides the political tension ahead of the 2019 general elections, data so far published show a slowdown in economic activities, even as the July Consumer Price Index report for July as published by the National Bureau of Statistics (NBS), shows a further move towards single-digit inflation. The decline in July PMI and consumer confidence index was due to the fall in consumer demands which has affected the performance of consumer goods manufacturing companies, as reflected in the half year corporate earnings. These has further depressed the share prices of these companies on the NSE.

As a pointer to the fact that all is not well, the benchmark All-Share index of Nigeria’s stock market as a leading indicator of the economy has suffered a year-to-date decline of 9.48%. This is after it recorded almost 17% jump in January 2018 alone, before the ongoing downtrend that had lasted over seven months.
Economic reports from CBN, like the pool of foreign reserves, money supply, the 4% dip in oil price recently to $70.62 per barrel, among others, have since confirmed the decline. When the oil price drop is combined with the effect of a 7.3% slip in production output to 1.66 million barrels per day in 2018Q2, it only shows that the Federal Government’s revenue projection for 2018 could come under some pressure. This could make further fiscal consolidation a major challenge as the market expects implementation of 2018 budget and electioneering spending to impact the liquidity level in the system.

The NSE benchmark index on Thursday started out sharply on the downside in the morning hours, a situation that was sustained until afternoon, as highly capitalized stocks suffered further decline. It touched a low of 34,603.07 basis points, from its high of 35,069.34bps, as corrective wave extended, despite marginal retracement in the last few minutes, before closing at 34,617.12bps on improved volume. This signals that investors are bailing out for safety to watch events unfold in the short term, ahead of next year’s general elections.

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Market technicals for Thursday’s session were negative and mixed as volume traded was high and above the recent market average in the midst of negative market breadth and sentiments. This was confirmed by Investdata’s Daily Sentiment Report, showing a ‘sell’ position of 97% and ‘buy’ volume at 3%. Volume index was 0.97 of the day’s total transactions.
The momentum behind the day’s market performance was weakened further, as reflected in the money flow index at 19.22bps, sharply down from previous day’s 28.90 points, indicating that funds left the market in the midst prevailing low liquidity in the market and economy.

Index and Market Cap
Thursday’s composite index at the end of trading shed 456.39bps at 34,603.07bps, after opening at 35,0069.34bps, representing a 1.29% decline, to breakdown the psychological line of 35,000, while market capitalisation dropped by N164.62bn to close at N12.61tr, from an opening value of N12.81tr, representing 1.29% value loss, to further worsen investors’ negative position.
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The downturn on Thursday was as a result of price depreciation in medium and high cap stocks that impacted negatively on the NSE’s Year-to-Date return, which further worsened to 9.48%, just as market capitalization decline within the period rose to N970.61bn, 7.13% below the year’s opening value.



Bearish Sector Performance
Sectorial performance for the day remained bearish, except for the NSE Oil/Gas that closed higher by 0.48%. Market breadth was negative as the number of decliners outpaced advancers in the ratio of 27:17, to record ten sessions of bearish run.

Market activities were up in volume and value by 13.49% and 6.47% respectively to 237.81m shares worth N3.09bn from the previous day’s 209.54m units valued at N2.9bn.
Transactions for the day were boosted by trading in financial services and consumer goods stocks: UBA, Guaranty Trust Bank, FBNH, Zenith Bank and International Breweries that witnessed increased trading to top the activity chart.
Equity Assurance and Portland Paints were the best performing stocks that topped the advancers’ table, after gaining 10% and 9.7%respectively, which closed at N0.22 and N2.47 respectively, purely on market forces.
On the flip side, Newest ASL and Neimeth were the worst, losing 10% and 9.59% respectively to close at N4.05 and N0.66 respectively as a result on profit taking and market trend.

Market Outlook
Being the last trading of the week, we expect the market to remain in red as bargain hunters take advantage of the low-price regime ahead of political party primaries. The ongoing anxiety in Nigeria’s political environment by party leaders are scaring investors away. The market may also likely be impacted by the outcome of the expected Q2 GDP report any moment as the whole world watches Nigeria’s politicians ahead of the all-important 2019 general elections.

Meanwhile, investors continue to interpret the recent Q2 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released so far as a basis for determining the market and economy’s direction going forward. More disappointing reports will drive the market further down, or inspire a reversal if the numbers beat expectation.
Also important, is the outcome of the shadow elections by political parties taking place in the month of August. 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, 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 fundamental.


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Ambrose Omordion
CRO|Investdata Consulting Ltd
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https://investdata.com.ng/2018/08/gradually-investors-take-advantage-of-ngses-low-price-regime-await-q2-gdp-data/