Volatility Lingers On NGSE Amidst Earnings, As Investors Yearn For Positive Economic News

Market Update for March 14
Reversal on the Nigerian Stock Exchange failed on Thursday as its benchmark All Share Index (NSEASI) closed lower again on a low traded volume, in the midst of negative market breadth, revealing that factors militating against the nation’s equities market are beyond cautious trading and mixed corporate earnings. There is the more major fundamental challenge of low liquidity and a lack of uncertainty about what to expect from the government’s economic direction, judging by its actions and inactions over the last four years, just as there is no sigh that things would change for the better, at least since after the general elections. This, analysts say is a major cause for concern among investors.

Investors would also not just gloss over the events that happened in the days leading to the general elections, the Dee-day and after, showing that political instability is real, a situation that is expected to result in a plethora of court actions. For example, Abubakar Atiku, mainly opposition candidate for the Presidency is in court to prove that the Muhammadu Buhari government stole his mandate. Add this to the damning reports on the electoral process by international observers, the sheer number of persons killed, or electoral officers kidnapped and the fact that the results in so many stays declared inconclusive, then you would understand the reason why investors are playing safe.
Investors are also on the lookout for any sign of new economic policy statement or area of expected improvement on the government’s plan for economic recovery development and growth, but this is slow in coming yet.

It must also be noted that figures and the mixed corporate numbers emanating from the ongoing earnings season, are a reflection of economic realities in Nigeria’s 2018. In less than a fortnight, the first quarter 2019 ends. There is a likelihood that the trend could continue, because there is yet no budget to give companies a sense of direction. There is no point belabouring 2019 budget would be very late in coming, given that discussions on it have just started at the National Assembly, because it was presented very late by the Federal Government to the National Assembly, even as focus was on the elections until now.

Even as the legislators have promised to complete work on the budget before the expiration of their current mandate before May 29, 2019, they have warned that their work on the Appropriation Bill may be anything, but thorough, given the prevailing circumstances.
Meanwhile, volatility persisted as the day’s trading started slightly in the upside, but suffered a setback between mid-morning and afternoon, as massive selloffs in banking and industrial goods to pulled down the index to 31, 210.79 basis points, after touching intraday highs of 31,390.78bps to finish the session on a negative note.

Market technicals for Thursday were negative and mixed with volume traded lower than previous day’s, in the midst of negative breadth and sentiment, as revealed by Investdata’s Daily Sentiment Report, showing a sell volume of 99% and buy position of 1% on a total daily transaction volume index at 0.51.
Momentum behind the day’s market performance was low but slightly up, despite the bearish mood as shown by the money flow index at 26.10 points, up from previous day’s 21.43bps, indicating that funds are entered some stocks irrespective of the down market.

Index and Market Cap
The benchmark NSEASI lost 149.49bps at the end of the session, from its 31,360.28bps opening level, representing a 0.48% decline; while market capitalization shed N55.75bn, closing at N11.64tr, from its opening value of N11.69tr, also representing a 0.48% depreciation in value.

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Thursday’s downturn was impacted by selloffs in medium and high cap stocks like Dangote Cement, Nestle, Guaranty Trust Bank, Zenith Bank, Access Bank Eterna, FBNH, Fidelity Bank, FCMB, as well as May and Baker. Also, the share prices of United Capital and Africa Prudential, among others, were adjusted during the session, helping to impact negatively more on Year-to-Date loss position to 0.70%, while market capitalization stood N499.64bn from the year’s opening level of N11.72tr, representing a 0.70% decline in value.
Access Bank announced final dividend of 25 kobo with of dividend yield of 4.23% on mixed earnings after the close of the day’s trading.

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Insurance and Oil/Gas that close in the green, even as market breadth remained negative, as decliners outnumbered advancers in the ratio of 20:9.
Market activities were mixed as volume was down by 52.94% to 177.63m shares, compared to previous day’s 377.49m units, while value was up by 13.27% to N2.56bn from midweek’s N2.26bn. Volume was driven by financial services stocks like: Zenith Bank, Sterling Bank, FCMB, Guaranty Trust Bank and Fidelity.

The best performing stocks for the day were McNichols and Dangote Flour, which gained 9.62% and 8.42% respectively to close at N0.57 and N10.30per share on the dividend of 5kobo proposed and market sentiment respectively. On the flipside, Learn Africa and Transcorp Hotel lost 9.66%% and 9.24% respectively to close at N1.31 and N5.40 each, owing to profit taking and impact of market forces.

Market Outlook
With the expectation of more 2018 financials, the selloff is likely to subside, but need positive economic statement and policy to give direction while volatility may continue, as market players adopt the wait-and-see attitude in the face of repositioning for the ongoing 2019 dividend declaration season and relative post-general elections peace to shape market performance in the interim. We advise cautious trading and investing while positioning in fundamentally sound equities.

Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on earnings reports, but 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 also that investors should allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals

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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/2019/03/volatility-lingers-on-ngse-amidst-earnings-as-investors-yearn-for-positive-economic-news/