Mixed Performance Ahead, But Reversal Imminent, As NGSE Forms Double Bottom

Market Update for May 8
Equity prices on the Nigerian Stock Exchange (NSE) closed down again at midweek as selloffs continued, because market operators have since activated their cautious mode amidst the prevailing uncertainties, in the absence of any news in the offing capable of inspiring hope that the administration has plans to reinvigorate the economy and rather allow the ship to twist and turn.
Until then, there is the rising confidence crisis and low market liquidity arising from the fact that smart investors have earlier exited, triggering a flight to safety, seeking solace in the money and fixed income market that continues to experience a boom.
On the political front, the Presidential Election Tribunal began sitting also on Wednesday, and has fixed next week for hearing on the suit by the main opposition Peoples Democratic Party (PDP) and its candidate, challenging the outcome of the February 23 Presidential election which returned President Muhammadu Buhari for a second term of four years.

However, Professor of Finance & Capital Market, and head, Banking and Finance Department, Nasarawa State University, Keffi, Uche Joe Uwaleke, wants investors to take advantage of prevailing low equity prices on the NSE to boost their returns on investments thereby taking advantage of an imminent market reversal, which he forecast could happen by end of second quarter. He listed factors that could drive the recovery to include a possible lowering of the benchmark Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN), rising oil price and the continued stability in foreign exchange (FX), among others (READ MORE).
Meanwhile, Wednesday’s trading started with a slight move to the upside in the morning session into midday, before oscillating between gains and losses by the afternoon trading, with the NSE All-Share Index touching intraday lows of 28,946.91 basis points. It, therefore, broke down the 29,000bps psychological line from 29,115.3bps on above-average traded volume to extend a 3-wave decline, to finish the session lower at 28,966.41.

Midweek’s market technicals were negative and mixed, with traded volume lower than previous day’s in the midst of flat breadth and selling pressure as revealed by Investdata’s daily sentiment report, with selling volume at 88% and buy volume- 12% of the total daily transaction volume index of 0.77.
The momentum behind the day’s market performance was weak as revealed through the Money Flow Index of 32.33 points, from previous day’s 38.16bps, indicating that funds continue to leave the market, as investors wait to see the 2019Q1 GDP and other economic indicators for April, even as things continue to unfold in the politico-economic space.

Index and Market Cap
At the end of the day’s trading, the composite NSEASI dropped by 130.00bps, closing at 29,096.41bps, after opening at 29,096.41bps, representing a 0.45% decline, just as market capitalization was down N48.86bn, closing at N10.89tr, compared to its opening value of N10.94tr, which also represented 0.45% value loss.
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The continued downturn at midweek was attributed to selloffs in high cap stocks like Dangote Cement, 11 Plc, Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, UBA, Access Bank, Dangote Sugar, Flour Mills, and Wema Bank, among others. This impacted negatively on the Year-to-Date loss, bringing it to 7.43%, just as market capitalization decline increased to N833.96bn, or 7.19%, from the year’s opening level of N11.72tr.

Bearish Sector Indices
All sectoral performance indices closed lower for the day, except the NSE Consumer Goods that was 0.12% in the green, while market breadth stayed flat, as decliners equaled advancers in the ratio of 21:21.
Market activities were mixed as volume dropped by 24.57% to 324.81m shares, as against the previous day’s 430.27m units, while value climbed 14.37% up from N2.83bn on Tuesday to N3.24bn. The day’s volume was driven by UBA Plc, Access Bank, Sterling Bank, Zenith Bank, and Courtville Business Solutions.

The best-performing stocks during the session were Beta Glass and livestock Feeds, which gained 9.97% and 6.73% respectively, closing at N68.95 and N0.63 per share, on the back of market forces. On the flip side, Goldlink Insurance and Chams lost 10% and 9.43% respectively, closing at N0.27and N0.48, on market forces and profit taking respectively.

Market Outlook
We expect this mixed performance to continue as market players digest the Q1 numbers in expectation of April inflation and Q1 GDP data, alongside the new cabinet list now that the 2019 budget has been passed. More importantly, we expect that the government’s disbursement and implementation style in 2019 and beyond will change for good so as to drive the economy.
This will complement ongoing efforts by the Central Bank of Nigeria (CBN), which on Monday, in its efforts at enhancing lending to the MSME sector, announced details of an initiative that will lead to improved funding of the nation’s fledgling creative sector, in partnership with the Bankers Committee (READ MORE).
Meanwhile, the NSE index on the daily time frame is forming double bottom that supports reversal, but let us await confirmation as trading opens this morning.

Investors look to the government’s policy direction as the market faces 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
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https://investdata.com.ng/2019/05/mixed-performance-ahead-but-reversal-imminent-as-ngse-forms-double-bottom/