Sustained Decline Indicators On NGSE Paves Way For Bargain Hunting, Rebalancing

Market Update for December 10

It was certainly another black Monday on the Nigerian Stock Exchange (NSE) as its composite All-Share index closed bearish to start the week, while wiping out previous gains, due to sell-offs across various sectors of the market. This has further paved way for bargain hunting ahead of year end portfolio rebalancing as fund managers and institutional investors cash in on the oversold region of the market and individual stocks.

The NSEASI had a slight gap down at the opening of the day’s session in the morning but rebounded in the mid-morning until midday before the index had an extended 4-wave corrective pullback that held the gap down in the afternoon. This resulted in a strong pullback to new lows, and by the end of the session, the index touched intraday low of 30,614.73 basis points from its high of 31,213.77bps, amidst continued selloffs among low, medium and high cap stocks.

At this point, investors should be extra cautious, especially as the market has so far failed to react to the seeming positive Q3 GDP data released by the National Bureau of Statistics. According to the NBS, Nigeria’s economy expanded by 1.81%, from 1.50% in the previous quarter, an indication that the growth may not have reflected on the corporate earnings presented by quoted companies during same period.
Although, Monday’s pullback could usher in bear-phase rally in Wave 4, let us however wait to see if that will happen or not.

Market technicals for Monday were negative and mixed as volume traded was lower than previous day’s in the midst of negative market breadth and strong sell pressure as revealed by Investdata’s Daily Sentiment Report, which shows a sell volume of 88% and 12% buy position. The volume index for the day’s total transactions was 0.75.

Index and Market Cap
At the close of trading, the NSE composite index shed 252.09bps, closing at 30,614.73bps from the 30,866.82bps opening figure, representing 1.07% decline, just as market capitalization fell by N92bn, closing at N11.18tr from an opening value of N11.27tr, representing a 0.82% value loss.

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The downtrend was impacted by price depreciation by high cap stocks like: Nestle, Nigerian Breweries, Guaranty Trust Bank, Stanbic IBTC, Zenith Bank, Oando, Flourmills,Wema Bank, Transcorp and FBNH, pulling doom Year-to-Date loss to 19.95%. Market capitalization YTD decline jumped to N2.58tr from its opening level in January, representing 17.88% decline during the period.

Bearish Sectors Indices
The sectoral indices were in red with sell-off in sectors, just as market breadth turned negative with decliners outnumbering advancers in the ratio of 25:14.
Market activities were mixed as volume was down by 8.05% to 164.58m shares from the previous day of 178.99m units, just as value was up by a marginal 7.02% at N1.67bn from previous day’s N1.56bn. Transaction volume was boosted by financial services stocks like: Diamond Bank, FBNH, Sterling Bank, UBA and Zenith Bank.

Transnation-wide express and Forte Oil were the best performing stocks, topping the advancers table, after gaining 8.47% and 6.39% respectively, closing at N0.64 and N19.15 each on market forces. The decliners’ side was led by Livestock Feeds and Cornerstone which lost 9.62% and 9.09% respectively, to close at N0.49 and N0.20 each, on market forces.

Market Outlook
We expect this volatility to be sustained as bargain hunting and portfolio repositioning for year-end to shape performance of the market ahead of Santa Claus rally, as number of companies hitting new 52-week low are on the increased to reflect undervalue state of the market.

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 the Presidential Election.

Investors should review their positions in line with their 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 low in the midst of weak company, economic and market fundamentals.

Meanwhile, we say a big thank you to all facilitators and participants at our INVEST 2019 TRADERS & INVESTORS SUCCESS SUMMIT, held at the weekend in Lagos. It was yet another successful, insightful and educative outing that not only offered direction as to where investors should look to for a profitable 2019, but industries, sectors and companies to look for worthwhile returns.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
https://investdata.com.ng/2018/12/sustained-decline-indicators-on-ngse-paves-way-for-bargain-hunting-rebalancing/