Interim Dividend Hike Fails To Stimulate NGSE Indicators Out Of Slumber

Market Update for August 8, 2018

Nigeria’s equity market indicators have continued to decline in an unpredictable pattern, what with the daily drama in the sociopolitical environment fueling fears and uncertainties over next year’s general elections. The focus of President Muhammadu Buhari’s administration on the politics re-election in a divided party is further slowing down the economy, just as the expected impact of the faithful implementation of the year’s budget has not in any way reflected on the economy and the life of Nigerians.

The dwindling investor confidence and low liquidity in the market is evident in the recent lukewarm reaction to interim dividends of 30 kobo per share each declared by directors of Zenith and Guaranty Trust Bank recently.
The stock market on Wednesday had a mixed session to again close marginally lower, with the NSE’s benchmark All-Share index down for most of the day, touching intraday low of 36,295.55 basis points, from highs of 36,336.04bps before closing at 36,299.82bps in the last few trading minutes to finish lower, while breaking down the strongest support level so far in the year.

The prevailing market situation has not been friendly to many stocks, especially high cap equities that remain the toast of foreign investors. But then, knowing the right value and growing companies to buy now or post-election is very important. The criteria for choosing quality companies with excellent earnings that will support price and dividend were discussed at the July 28, 2018 workshop hosted by Investdata Consulting. The home study packs are ready now. For your Study Pack, call or send YES to the phone numbers below.

Market technicals at midweek were negative and mixed, as volume traded was lower than the recent market average in the midst of positive market breadth and negative sentiments as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ position of 89% and ‘buy’ volume at 11%. Volume index was 0.40 of the day’s total transactions.

The impetus behind the day’s market performance was weak, despite the little improvement recorded as indicated by the money flow index at 32.44bps, up from previous day’s 30.99 points, indicating that funds are still entering few stocks especially the interim dividend paying equities regardless of the low liquidity.

Index and Market Cap
Midweek’s trading closed down again, as the All Share index shed 33.98bps, closing at 36,299.82bps, after opening at 36,333.80bps, representing a 0.09% decline, while market capitalisation dropped by N12.4bn to close at N13.25tr from an opening value of N13.26tr, which represented 0.09% value loss to worsen investors’ negative position.
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Wednesday’s downturn resulted from price depreciation in medium and high cap stocks like Total Nigeria, Guranty Trust Bank, Oando, UBA, FCMB, Diamond Bank, Honeywell and Cutix which impacted negatively on the NSE’s Year-to-Date return, to further deepen the negative position to 5.08%, just as market capitalization decline within the period stood at N359.95 billion, and 2.64% below the year’s opening value.

Bearish Sector Performance
The sectorial performance indexes for the day all closed red. Market breadth was positive as the number of advancers outpaced decliners in the ratio of 19:16, to continue straight four sessions of down market.

Market activities were down in volume and value by 54.03% and 67.49% respectively to 114.04m shares worth N730.04m, as against the previous day’s 243.87m units valued at N2.22bn.
Transactions for the day were boosted by trading in financial services and conglomerate stocks: UBA, Sovereign Trust Assurance, Transcorp, Zenith Bank and Regency Insurance that witnessed increased trading to top the activity chart.

Unity Bank and Sovereign Trust Assurance were the best performing stocks that topped the advancers’ table, after gaining 9.8% and 8.7% respectively, to close at N0.94 and N0.25 respectively, purely on market forces.
On the flip side, Mutual Benefits and NSL Tech were the worst, losing 9.68% and 9.09% respectively to close at N0.28 and N0.30 on profit taking and market forces.

Market Outlook
We expect the downtrend to continue as political risk escalates after Q2 earnings reporting season closed on a mixed performance ahead of Q2 GDP report that will hit the market any moment as the whole world watch Nigerian politicians toiling with the future of this great nation.

Meanwhile, investors continue to interpret the recent Q2 earnings reports so as to rebalance their portfolios and watch the political space and analyse at the actual coming 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
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