Speculative Trading Continues As NGSE Seeks New Incentive As Index Declines Further

Market Update for November 26

The benchmark All-Share index Nigerian Stock Exchange (NSE) on Monday closed negative, extending the fourth session of back-to-back losses on a strong selling pressure in the banking, consumer and industrial goods sectors.

Trading opened on a slight gap up in the morning to mid-morning before pulling back between midday to afternoon on selloffs in medium and highly capitalized stocks, made worse by the price adjustments of Nestle and Total Nigeria for the Q3 interim dividends declared by their directors. The index touched intraday highs of 31,779.90 basis points from a low of 31,562.31bps before retracing up marginally to finish the session at 31,579.72bps on a negative market breadth and below its opening points.

The continued selloffs have further depressed the market to make lower lows on low volume traded as investors’ apathy persisted due to the persisting unclear direction of the Federal government’s economic policies and implementation style of the budget since 2015. Economic activities that drive growth have continued to drag, often taking two steps forward and five backwards. The huge budgets and the much celebrated improvement in capital budgeting to drive developmental projects have not reflected in the economy in anyway despite the high debt profile resulting from borrowing to finance the budget.

As Nigeria goes into another election season, which has so far plagued the market, owing to the perceived uncertainties, analysts are on the lookout for a 10-year economic development blueprint with delivery time and process that will give Nigerians hope. This should not be time for mere sloganeering by politicians in the name of party manifestoes that empowers few individuals, family members, friends and business partners.

Monday’s market technicals were negative as volume traded was low amidst negative market breadth and strong selling sentiments as revealed by Investdata’s Daily Sentiment Report, which shows a sell position of 92% and 8% buy volume. The volume index for the day’s total transactions was 0.61, while momentum behind the market’s performance was weak, as Money Flow index stood at 45.60bps, from previous day’s 46.2ps, indicating that funds are leaving some stocks and the market ahead of end of the month window dressing by traders and fund managers.

Index and Market Cap
At the end of the day’s trading All Share index shed 98.98bps, to close at 31,579.71bps after opening at 31,678.79bps, representing 0.31% decline, just as market capitalization fell by N36.13bn to close, at N11.53tr from an opening value of N11.57tr, representing a 0.31% dip in value.

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The session’s downturn was driven by price depreciation in medium and high cap stocks likes Guaranty Trust Bank, Stanbic IBTC, Zenith Bank, UBA, Access Bank, Diamond Bank, FCMB, FBNH and Lafarge Africa. This impacted negatively, increasing the Year-to-Date loss to 17.42%, while market capitalization YTD decline rose to N2.45tr from its opening level in January, representing 15.34% drop.

Mixed Sectors Indices
Sectorial performance was largely bearish, except for the NSE Insurance and Oil/Gas that closed higher. The market breadth was negative as decliners slightly outweighed advancers in the ratio of 18:17.
Market activities were down in volume and value by 53.15% and 66.72% respectively at 104.87m shares worth N1.94bn, from previous day’s 223.84m units valued at N2.63bn.

Transaction volume was boosted by financial services, consumer goods and technology stocks like: Unilever, Zenith Bank, Inter-link, FCMB and Diamond Bank
The best performing stocks for session were PZ and GSK, topped the advancers’ table, after gaining 9.86% and 9.43% respectively to close at N11.70 and N14.50 each on market sentiments and low price; while the decliners’ side was led by Diamond Bank and AG Leventis lost 9.47% and 9.09% respectively to close at N0.86 and N0.30 each , on market forces.

Market Outlook
As we have earlier advised, speculative activities will continued to shape performance of the market since there is no immediate incentive for the market except the low prices as many stocks are hitting new 52 week low. Going by the timetable of the National Bureau of Statistics (NBS) released earlier in the year, the nation’s Q3 Gross Domestic Product (GDP) report is slated for release on Tuesday, November 27, same date as the Q3 capital importation report.

The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of the expected Q3 GDP and full year company earnings position. These are likely to drive prices north, or south, while determining market direction before or after Presidential Election.

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,
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.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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ambrose.o@investdataonline.com
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https://investdata.com.ng/2018/11/speculative-trading-continues-as-ngse-seeks-new-incentive-as-index-declines-further/