NGSE Indicators Return To Red, As Nigeria’s Q2 GDP Data Confirms Economic Slowdown

Market Update for August 27, 2018

Trading and investing risks continue to mount on the Nigerian Stock Exchange (NSE), despite the prevailing low valuation as a result of two consecutive quarters of economic decline as confirmed by the nation’s Q2 GDP at 1.5%, judging by the data released Monday by the National Bureau of Statistics (NBS), compared to 1.95% in the previous quarter. The GDP level had earlier fallen from 2.11% in 2017Q4, amidst the heightening political uncertainties ahead of next year’s general elections (READ MORE).

There is als a seeming lack of well-articulated economic reform policies by the fiscal authorities to match concerted efforts by the monetary authorities, including the proposed single-digit loans for agric and manufacturing companies in the country, using the pool of sterile funds kept with the apex bank.

Monday’s trading session was volatile, closing negative to reverse the two previous trading sessions of positive sentiment, starting out with a little move to the upside, before the ensuing selloff between the midday and afternoon after Dangote Cement Plc suffered a pullback. The NSE All-Share Index thereby tested another support level at 34,634.30 but couldn’t get through, before rolling over in the last hour to close down at 35,311.36 on a low volume traded.

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Market technicals on Monday were weak and mixed, despite the positive sentiments in the midst of relatively low volume traded and positive market breadth as confirmed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 78% and ‘sell’ volume at 22%. Volume index was 0.70 of the day’s total transactions.

The energy behind the day’s market performance was weak, as reflected in the money flow index at 31.95bps, despite inching up from previous day’s 30.97 points, indicating that funds entered few stocks in the midst of the prevailing low market liquidity.

Index and Market Cap
The All-Share index lost 114.81bps, closing at 35,311.36 basis points, having opened at 35,426.26bps, representing a 0.32% decline, just as market capitalisation shed N56bn, closing at N12.8tr, from N12.84tr, representing a 0.32% decline.

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Monday’s downturn was attributed to losses suffered by Dangote Cement, Dangote Flour, UACN, and Unilever, which impacted negatively on the NSE’s Year-to-Date return now at 7.67%. Market capitalization within the period dropped to N698.24bn, or 4.98%.

Bull Sector Performance.

Sectorial performance for the day was largely bullish, except for the NSE Industrial goods that closed down by 0.40%, while the NSE Insurance and Banking indices reduced the effects of the loses, chalking 0.99% and 0.98% respectively. Market breadth was positive as advancers outnumbered decliners in the ratio of 26:14 to halt the two previous days of bull market.
Market activities were down in volume and value by 66.72% and 55.36% respectively to 178.81m shares worth N2.02bn, from the previous day’s 527.74m units valued at N4.53bn.

Transactions for the day were boosted by trading in financial service and aviation stocks that witnessed increased trading to top the activity chart, like: Nahco, Access Bank, Diamond Bank, UBA and Zenith Bank,
Niger Insurance and Diamond Bank were the best stocks as they topped the advancers’ table, after gaining 10% each, closing at N0.44 and N1.21 respectively, purely on market sentiments. On the flip side, First Aluminum and Ikeja Hotel were the worst, losing 10% and 9.68% respectively to close at N0.36 and N2.52 apiece, due to profit taking and market trend.

Market Outlook
We expect the market to oscillate as bargain hunters take advantage of the low-price regime, as political party primaries kicks off. 

The ongoing anxiety in Nigeria’s political environment by party leaders and politicians continues to heat up the system and scare investors away, while the world keenly watches Nigeria’s political space amidst interesting development in the jostle for political relevance in the day’s leading to 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.

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.

Amrose Omordion
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
https://investdata.com.ng/2018/08/ngse-indicators-return-to-red-as-nigerias-q2-gdp-data-confirms-economic-slowdown/