Speculative Trading May Shape NGSE’s Direction, Despite Seeming Negative Outlook
Profit booking and price adjustment on the Nigerian Stock Exchange during last week helped to short-lived previous week’s bullish transition on the Nigerian Stock Exchange (NSE), in the midst of mixed sentiment as its benchmark All-Share index closed lower at the peak of the Q1 earnings reporting season.
The market’s continued mixed performance has weakened the recent seeming recovery move, with the bears winning the battle ahead of the new week, which ends the month of April, pushing the NSE index below the 30,000 basis points psychological line as other indexes closed lower on a high volume traded, which reflected sell-offs during the period.
The intra-week low of 29,740.40bps shows the bears are still in charge, just as Friday’s bearish move indicates that traders and investors are merely awaiting positive news, and indeed hints of the government’s economic policy direction that can drive economic activities and support development.
Despite the mixed economic data from the National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN), showing that 20.9m Nigerians are unemployed, just as the 2018 full-year and Q1 corporate earnings which have been uninspiring. There are also the dwindling consumer price index, interest rate marginal cut with both manufacturing and services Purchasing Managers’ Indexes expanded for Q1 and April, while stock prices try to recover from losses suffered before now
Dangote Flourmills was the biggest winner for the week, gaining 45.53%, as the company soared after its management announced that it will put the ₦130bn binding offer by Olam International to acquire its entire five billion issued share capital (READ MORE).
Although many investors have taken speculative positions on the basis of this announcement since it was first made on Tuesday to benefit from a possible capital appreciation, for the Nigerian equity market as a whole, we believe the major effect of this deal (when consummated) would result in the loss of ₦70.75bn approximately, being the contribution of Dangote Flour Mills, from the NSE market capitalization.
On the other hand, we anticipate a fair deal to the benefit of current shareholders of the company if the deal materializes.
Nonetheless, we advise speculative investors to be modest in accumulating the stocks as the principal terms of the offer, which will be conveyed in the scheme document, have not been released to guide the investing public. This news overshadowed last Wednesday’s listing of SAHCo Plc, which added N6.3bn to the NSE capitalization.
Movement Of NSEASI
In the four trading sessions of last week, arising from the Easter holiday recorded a mixed performance with two days of up and down sessions on selling pressure, due to weak Q1 numbers being released to the market.
Trading activities for the week opened on a marginally positive note on Tuesday with 0.01% gain, which was reversed on Wednesday due to profit taking, as the index lost 0.63%. On Thursday, it inched up 0.07%, on the strength of buying interest in undervalued stocks, before being sold down on Friday, losing 0.60%, which brought the week’s total loss to 1.15%, thereby reversing previous week’s 1.74% gain.
The advancers’ table for the period was dominated by low priced stocks as profit-taking hit blue-chip stocks due to weak Q1 scorecards that were below expectations. The selloff was evidenced in the sector indexes that closed in red, except the NSE Oil/Gas index that was up 0.48%, while the NSE Consumer index led the decliners’ side with 2.52%, followed by the NSE Insurance and Industrial goods indices with 0.90% and 0.71% respectively.
The momentum behind the week’s performance was weak, as revealed by the money flow index at 30.64 basis points, compared to 35.55bps in the previous week, indicating that funds are leaving the market. This was just as selling position stood at 100% for the period under review.
NSEASI Weekly Time Frame
The NSE All-Share index during the week pulled back on a high traded volume, while at the same time forming a double bottom and signaling an uptrend with negative sentiments, at a time Money Flow index is looking down. Also, the NSEASI is trading below its 20-Day Moving Average and MACD is set to breakdown the signal line that confirm full bearish trend.
Bearish Sectors Indices
All the sectoral performance indices were down, except for the NSE Oil/Gas that closed in green, while market breadth was negative with decliners outnumbering advancers in the ratio of 40:30, to halt previous week’s up market. Volume and value for the period were up by 44.84% and 32.02% respectively to 1.43bn shares worth N15.09bn, compared to previous week’s 988.86m units valued N11.43bn. The high volume confirms the impact of selling pressure as Q1 earnings season withdrew to a close next week and economic data relatively positive.
The best-performing stocks for the week were Dangote Flour and Japaul Oil, which led the advancers’ table with 45.33% and 40% gains respectively, closing at N15.55 and N0.28 per share on the proposed acquisition and market forces. On the other hand, Guinness Nigeria and May & Baker lost 19% and 13.4% respectively, closing at N48.65 and N2.25, as investors react to weak Q3 earnings reports released during the week and price adjustment for dividend.
During the week also, the prices of Total Nigeria, GSK, FBN Holding, May & Baker, Capital Hotel and Infinity Mortgage Bank were adjusted for a dividend of N14, 50 kobo, 26 kobo, 20kobo, three kobo and three kobo respectively, as proposed by their directors.
Also, investors are already expecting the Q1 GDP ahead of 2019 budget approval next week.
Market Outlook
We expect the mixed performance to continue this week as the end of month window dressing and trading account balance in the midst of expected budget approval and a new cabinet to drive the economy in the new dispensation. We must look to a positive trigger to sustain the recent market recovery. That notwithstanding, we would not overlook the possibility of a bargain-hunting motive supporting positive performance, especially with many fundamentally sound stocks remaining underpriced.
With the prices of major blue chips continuing to drop in recent weeks, we expect speculative trading to shape the market’s direction this week, despite the seeming negative outlook.
The sustained volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on the political space and post-election market dynamics. Investors should review their positions in line with their investment goals, the strength of 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 and 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.
TAKE ACTION
The difference between you and others who are not aware of what I am sharing with you is ACTION. Take action that will transform your life throughout 2019 and beyond by getting the just concluded and life-transforming INVEST 2019 TRADERS & INVESTORS SUCCESS SUMMIT, CHART SUMMIT, and POST ELECTION BULLS & BEARS Home study pack (USB) that you can play on your phone, Laptop and Television set. The events were a successful, insightful and educative outing that not only offered direction as to where investors should look for profitable trade in 2019 and beyond, insight into industries, sectors, and companies to seek worthwhile returns. What stocks should you buy? Grab the pack for the 10 Golden Stocks with the possibility of offering in 2019 multiples of what broader stocks do, coming out of this market correction environment.
Don’t sit on the Fence call or text Stock to 08028164085, 08032055467, 08111811223 now.
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/2019/04/speculative-trading-may-shape-ngses-direction-despite-seeming-negative-outlook/
Comments
Post a Comment