Continued Decline In NGSE Index Reveal New Attractiveness Ahead Of Q3 Reports

Market Update for September 11, 2018
It was a terrific session on Tuesday as bearish dominance persisted on Nigerian Stock Exchange with increasing negative sentiments and selloffs in blue chip companies that dragged the market lower, following which many equities continue to trade near their 52-week lows. The market now looks attractive, but low liquidity and fear of socio-political risk ahead of next year’s general elections, which begins in less than 154 days have slowed down buying position. These are in addition to other external factors militating against the market for the past eight months, following which the market has become the worst performing across the globe.

Again, on Tuesday, US 10 years Treasury yields broke out the curve and trend to impose strong challenges on emerging markets price action and valuation, which indicates that the current situation in frontier markets, of which Nigeria is one, will continue. See the chart below.

Meanwhile, the NSE All-Share index started the day with a big gap down in the morning session which got deeper by midday to afternoon, before rallying back sharply after touching intraday lows of 33,114.12 from highs of 33,609.86 to close the day lower at 33,449.17 with the help of price appreciation by Nestle Nigeria to reduce day loss momentum.

Despite the mixed performance of many companies in their half year results, the current market value is revealing some opportunities for different investment purposes and objectives. The earnings capacity of the companies is also revealing their capacity to support their prices, especially against the backdrop of their high upside potentials if positive performance is sustained in the expected Q3 scorecards.

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Tuesday’s market technicals were negative with mixed sentiments, marginal improvement in volume traded and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 68% and ‘sell’ position at 32%. Volume index was 0.65 of the day’s total transactions.
The energy behind the day’s market performance was weakened further, as shown in the money flow index at 32.41bps, down from previous day’s 37.98bps, indicating that funds are still leaving the market as high cap stocks nose-diving further in the midst of low liquidity.

Index and Market Cap
At the close of trading, the benchmark index lost 162.52bps, closing at 33,449.17 basis points, after opening at 33,611.69bps, representing a 0.48% decline, just as market capitalisation dropped by N59.34bn, closing at N12.21tr from N12.27tr, representing a 0.48% value depreciation to further deepen investors’ red position.

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The session’s downturn was due to continued selloffs in medium and high cap stocks like Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, Access Bank, UBA, Forte Oil, Dangote Sugar and Nahco that further impacted negatively on the NSE’s Year-to-Date return now at 12.54%. Loss in market capitalisation within the period dropped to N1.4tr, or 10.27%.

Bearish Sectoral Performance
Sectoral performance for the day was largely bearish, except for the NSE Consumer Goods index that closed higher, just as market breadth was negative with decliners outpacing advancers in the ratio of 31:14 to continue five day of bearish transition.

Market activities in volume and value terms were up 9.47% and 34.29% respectively as 137.63m shares changed hands for N1.36bn, from the previous day’s 137.63m units valued at N1.36bn.
Transactions for the day were boosted by trading in financial service stocks like: Guaranty Trust Bank, UBA, Diamond Bank, Access Bank and Zenith Bank, which witnessed increased trading to top the day’s activity chart.

The best performing stocks for the day were Law Union and Nestle Nigeria that topped the advancers’ table, with 10% and 9.6% gain respectively to close at N0.55 and N1,485 per share, purely on low-price attraction. On the flip side, Dangote Sugar and Nacho were the worst, losing 10% each to close at N14.40 and N3.60 on market forces.

Market Outlook
We expect the market to continue its volatility as bargain hunters take advantage of the low-price regime, in the midst of continued selloff and political risk, especially as primaries kick off any moment from now and economic data on August inflation report expected.

Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released has given basic insights into companies’ earnings power that are likely to drive prices and determine the market valuation.
Investors should review their positions in line with investment goals, strength of the company’s 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,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.
Attention

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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https://investdata.com.ng/2018/09/continued-decline-in-ngse-index-reveal-new-attractiveness-ahead-of-q3-reports/