All Eyes On FG To Sign Budget 2019, Amidst Imminent Repositioning, Profit Taking On NGSE

Market Update for May 23
As anticipated, the engineered gaining momentum on the Nigerian Stock Exchange (NSE) slowdown on Thursday, as profit-taking and reality set in to correct the recent market sentiments led by the newly listed MTN Nigeria a week ago and Dangote Cement. The seeming return of sanity may reveal the genuine state of the market and its direction, going forward.
Since the stock market is a leading indicator that gives insight into the economic situation or state, one would expect that sentiment towards the two would be similar. As we have seen over time, that is far from always being the case.

At the moment, both of these indicators are showing entirely different outlooks with Nigeria’s Q1 GDP looking down at its growth rate of 2.01%, when compared to the preceding quarter’s 2.38%, at a time the composite NSE All-Share Index is soaring higher in the midst of weak market fundamentals that have ignored the prevailing low valuation in the market.
See the chart below for Nigeria’s economic performance over the past five years


The MTN Nigeria magic slowed down during Thursday’s trading session. For the first time also, according to some observers of the trend, the NSE’s trading board showed the bids and offers at the same time since the MTNN hit the market in the last 5 trading sessions. Before then and quite curiously, all traders saw on the board were bids on the left side of the screen, now offers. Thursday’s trading offer for MTNN was 70% international investors and 30% local, while bids were 60% local institutional investors and 40% local retail investors.
We note Thursday’s announcement plans by the management of the Securities & Exchange Commission (SEC) and the NSE to streamline by the process of listing new companies on the bourse to reduce costs and time (READ MORE).

Meanwhile, the trading session was yet very volatile and mixed, opening marginally to the downside in the morning session, retracing up by the mid-morning to early afternoon, before pulling back to close the day higher at 31,477,51 basis points on a high traded volume. In all of these movements, the index touched intraday high of 31,917.13 basis points, from its low of 30,902.23bps to remain above 31,000 level.
Market technicals for the day were positive and mixed, as traded volume was higher than the previous day’s, in the midst of negative market breadth and mixed sentiment as revealed by Investdata’s daily sentiment report. Buy position stood at 57% and sell volume, 43% of the total daily transaction volume index of 1.88.
The energy behind the day’s performance was up but still weak, as shown by the Money Flow Index of 42.28points, from previous day’s 38.56bps, indicating that funds are entering the market, amidst buying sentiment for high cap stocks.

Index and Market Cap
At the end of trading, the NSEASI gained 332.36bps to close at 31,477.51bps, after opening at 31,145.15bps, representing 1.07% growth, just as market capitalization climbed N146.39bn up, closing at N13.86tr, from its opening value of N13.72tr, which also represented 1.07% value gain. The NSE index continues to trade above its 100-Day Moving Average and outside the upper Bollinger band that further signals imminent reversal, as RSI has entered overbought region, reading 73.30.

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The upturn was sustained amidst mixed sentiment for high cap stocks like MTN Nigeria, Dangote Cement, Nestle, Guaranty Trust Bank, 11 Plc, Unilever and FBNH, among others. This impacted positively to turn the Year-to-Date position to gain of 0.15%, just as market capitalization gain soared to N2.15tr, or 18.07%, from the year’s opening level of N11.72tr.

Bullish Sector Indices
All the sectoral indices were largely up, except for the NSE Banking that closed lower by 0.20%, while the NSE Consumer and industrial Goods led the advancers, notching 1.33% and 0.82% each. Market breadth remained negative as the number of decliners outweighed advances in the ratio of 24:14.
Market activities were mixed performance, as volume traded rose by 90.03%, while value dropped 50.31% to 559.74m shares worth N8.68bn, from the previous day’s 294.57m units valued at N17.47bn. Volume was driven by ICT, conglomerates and financial services stocks, like Sovereign Trust Insurance, UBA, MTNN, Zenith Bank and Transcorp.
Law Union and Japaul Oil were the best-performing stocks as they topped the advancers’ table, gaining 10% and 9.09% respectively, closing at N0.44 and N0.24 per share on market forces. On the flip side, Academy Press and Livestock Feeds lost 10.5 each to close at N0.27 and N0.54, on market forces.

Market Outlook
We expect the trillion stocks’ magic to a slowdown in the midst of profit taking and value investors take advantage of the low valuation to rebalance their portfolio ahead of Q2 numbers. They may also take into consideration, plans by the Central Bank of Nigeria (CBN) to reduce banks’ participation in government securities, while boosting private sector lending to drive economic activities and investment.
More importantly, we expect that the government would sign the federal budget without further delay while we expect a change in its disbursement and implementation style in 2019 budget and beyond to make an impact and drive the economy.
Investors look to the government’s policy direction as the market faced low liquidity problems in the ongoing Q1 earnings reporting season, vis-à-vis market and economic fundamentals.

The drop in prices of major blue chips in recent times has created entry opportunities, following which we expect speculative trading to shape the market direction going forward.
The ongoing volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on political space and ongoing quarterly earnings position and post-election market dynamics. Investors should review their positions in line with their investment goals, the 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 to 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/2019/05/all-eyes-on-fg-to-sign-budget-2019-amidst-imminent-repositioning-profit-taking-on-ngse/