July Closes Red, As Political Anxiety, Economic Slowdown, Becloud NGSE Indicators

Market Roundup for July

July will be remembered by many traders and investors on the Nigerian Stock Exchange (NSE) as a month when many stocks suffered severe hemorrhage, besides being one that witnessed free-fall of equity prices. The loss would have been more severe, but for the reduction in the loss for the period, owing to month-end rotation and rebalancing of trading accounts in reaction to Q2 earnings reports released to the market, especially being the peak of the reporting season.
The bourse also saw last minute positioning as investors and traders sought to take advantage of the relatively low prices that triggered positive sentiments, despite the mixed performance of figures released so far. This resulted in three trading sessions of bull transition that reduced the momentum of price decline in the period under review.

The further decline of the market after June resisted four consecutive months of correction was due to sustained sell-offs by foreign and some domestic investors, due to dwindling confidence in the system, as economic slowdown continue in the midst of insecurity and anxiety ahead of the 2019 general elections. The fear over next year’s polls are not unfounded, given the enormous bad blood in the polity, especially after the Ekiti State governorship, even as all eyes are fixed on the coming Osun State. Still on politics, it has been one-week, one-trouble among the political class in view of the gale of defection involving Senate President Bukola Saraki and about 15 Senators as well as some governors, from the ruling All Progressives Congress to the rival Peoples Democratic Party ahead of 2019 general elections. This has further heightened fears among the investing public, resulting in cautious trading to watch as events unfold, while others have taken a flight for safety.

The rising crude oil price in the international market and sustained production output has impacted the nation’s foreign reserves since 2017. This has however not reflected in the data so far released in 2018 as economic activities slowed down in Q1 as revealed by GDP of 1.99%, there are also indications that the expected Q2 GDP may go in same direction, going by recent corporate earnings and economic data.
The bear dominancy during the period under review was obvious in the 22 trading sessions of the month on the Nigerian Stock Exchange (NSE), as the market was down for 13 days and up in just nine, thereby continuing the six months of decline. Year-to-date returns on the NSE remain negative at 3.20%, a factor that was attributed to a combination of low liquidity, capital outflows, mixed performance of listed companies and political uncertainties. Others included: the delay in passage, assent and possible implementation of the 2018 budget, as well as the declining buying pressure as revealed by volume traded for the period.

The positive economic data emanating from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) before now have been ignored by smart money investors that kept selling down their positions. This has prolonged the correction and made equities parade low Price/Earnings (P/E) ratios, that made stocks attractive for long-term positioning knowing that their waiting period in these stocks are short, as soon as this system induced decline is over after the election in 2019.
Meanwhile, the All Share Index for the month lost 1,260.77 points to close at 37,017.78 after touching lows of 36,316.30 and high of 38,322.94 within the period under review from the opening figure of 38,278.55 that represented 3.29% decline over the month of strong sell market position that reflected on the stock prices that are making lower low in recent days.
The selling volume of the total transactions for July was 65%, while buying position was 35% after six months pullback persisted on bear run, while volume index for the period was 0.88. Market capitalisation for the month shed N46bn to close at N13.41tr from an opening value of N13.87tr, representing a 3.31% depreciation in value. The market sustained a downtrend and negative sentiment for stocks, especially given the unstable political environment.

Traded volume for the month was down by 7.33% to 6.32 billion shares from 6.82 billion in the preceding month. The benchmark index year to date loss stood at 3.32% just as market capitalisation for same period was down by N225.74bn, same as 1.66% below the year’s opening value.
Market breadth for the month was negative with the decliners outnumbering advancers in the ratio of 95:17 to continue the bear transition despite the last three trading days of retracing up for the period due to buying sentiment for end of the month window dressing and rebalancing.

The NSE sectorial indexes bled profusely during the period, closing lower for the period, with NSE ASeM and Industrial having significant value loss of 14.46% and 10.42% respectively. They were followed by Consumer Goods, NSE 30, NSE Lotus, NSE Oil/Gas, NSE Banking and Insurance, which shed: 4.97%,3.52%,3.19%,2.92%, 2.78% and 1.76% for the month. The dwindling confidence is obvious as the month under review performance was opposite what it did in same period of 2017.

A further breakdown of the month performance showed that, 17 stocks appreciated in price and it was dominated by low cap stocks with only two equities gaining above 20%, compared to their opening value at the beginning of the month. With Cutix topped the advancers’ table after gaining 46%, helped by the higher dividend payout and bonus of one-for-one share held. CCNN followed, gaining 29.17%, helped by positive market sentiments and improved numbers. C/I Leasing jumped 17.87%, coming behind CCNN on news of foreign company taking a stake, despite the proposed share reconstruction ahead of right issue, while Continental Reinsurance, Aiico, Vitafoam, Seplat Custodian investment, Law Union an Sterling Banking closed the period better at 16.55%,16.29%,11.11%,8.31%,6.45%,6.38% and 5% respectively.

https://investdata.com.ng/2018/08/july-closes-red-as-political-anxiety-economic-slowdown-becloud-ngse-indicators/