NGSE Bear-run Leaves Blue-chips Trading Below 52-Week High, Amidst Low Liquidity

Market Update for the week ended May 10 and Outlook for May 13-17
Equity markets across the globe witnessed a bearish trend as the trade dispute between China and U.S escalated during the week, following the seeming breakdown in the discussion, following which new taxes were imposed on Chinese products early Friday. This was despite the scheduled meeting between both nations this week.

The Nigerian Stock Exchange (NSE) bled throughout last week due to selling pressure, continuing three consecutive weeks of decline which is gradually pushing the market into a two-year low on negative sentiments and weak market fundamentals.
Not even the just concluded 2019Q1 earnings season, or the full-year before it, made an impact on the indicators, given that the numbers were mixed, and even beclouded by anxieties that followed the general elections, beginning with that of the President and National Assembly on February 23, 2019. Investors and traders were also not swayed by mid-Thursday’s news of the news of reappointment of Godwin Emefiele as Governor of the Central Bank of Nigeria (CBN) for another five-year term, the first since 1982, by President Muhammadu Buhari (READ MORE).
It is however not impossible that investors were still digesting the announcement of Emefiele’s reappointment, vis-à-vis other economic indices.
Besides the weak market fundamentals that have negatively impacted the NSE’s composite index, there are factors such as low investor confidence, poor liquidity and the corporate earnings that came below market expectation. The market, therefore, needs a spike in form of positive news, amidst the market’s prevailing low Price/Earnings Ratio, which discerning investors and traders should take advantage of, especially blue-chip stocks which have suffered significant decline.

Also, the Federal Government had pledged to partner the NSE in the privatization of some public enterprises, which is expected to result in more companies becoming listed and in the process offering investors more options, in addition to contributing to the Ease of Doing Business (READ MORE).
The market is also anxiously awaiting the listing of MTN Nigeria shares by introduction on the NSE, which will further broaden the market and give investors more choices (READ MORE).
Meanwhile, the nation’s key economic indicators remain positive, with inflation rate dropping to 11.25%; just as the Monetary Policy Rate (MPR) was cut to 13.5%, while external reserves as at May 8, stood at $44.843bn. Also noteworthy is oil price selling above $70 per barrel, as at Thursday, just as the National Bureau of Statistics (NBS) is billed to publish the April consumer price index and Q1 GDP numbers May 20.

Movement Of NSEASI
Last week, the NSE’s benchmark All-Share index recorded an unimpressive outing, closing negative in all of the five trading sessions, losing 1.25%, after the previous week’s 1.78% decline. The loss brought year-to-date loss to 8.22%, which reveals the presence of juicier opportunities in the market, looking at it 52 weeks high and low.
Insurance stocks dominated the advancers table, despite the announcement of late filing by stocks in the sector and price adjustment for dividends proposed by their directors. Also, sell pressure continued in highly capitalized equities and blue-chip stocks, due to weak Q1 numbers.
The momentum behind the week’s performance was weak, as shown by the money flow index at 23.83 basis points, compared to 23.77bps in the previous week. This is indicating that funds are leaving the market, just as the sell position stood at 74% and buy volume, 26% on a transaction volume index of 0.94.

NSEASI Weekly Time Frame
The NSE Index action continues to pullback for the week, on a high traded volume and breakdown of this last Fibonacci retracement level that’s support will lead to lower lows, also reversal at this triple bottom formation is high depending on market forces. But looking at the negative sentiments that had dominated the market as MoneyFlow index is looking down. And, at the same time, NSEASI is trading below its 20-Day Moving Average and MACD is bearish. But the index touched the lower Bollinger bands signals ‘buy’ as reversal remains imminent.

Bearish Sectoral Indices
All the sectors suffered heavy losses with the NSE Oil/Gas shedding 5.3%, followed by banking with 2.8%; and Insurance, Industrial and Consumer goods closed 1.7%, 0.4% and 0.2% lower respectively. This reflected the selloffs irrespective of the positive news and expectations of fiscal stimulus. Market breadth was negative with decliners outnumbering advancers in the ratio of 49:19, to extend the down market.
Turnover for the period stood at 1.47bn shares worth ₦10.58bn in 17,603 deals, in contrast to a total of 1.47bn shares valued at ₦15.49 billion that exchanged hands last week in 18,090 deals.

Beta Glass and Courtville were the best-performing stocks for the week, topping the advancers’ chart with 23.1% and 13.6% gains respectively, closing at N68.95 and N0.25 per share on low price attraction and market forces respectively. On the other hand, Goldlink Insurance and Japaul Oil lost 36.1% and 33.3% respectively, closing at N0.23 and N0.26, on market forces and profit-taking after the recent rally.
During the week also, the prices of Caverton, Prestige Assurance, Aiico Insurance, and Consolidated Hallmark insurance were adjusted for a dividend of 25kobo, 3 kobo, 6 kobo, and 2kobo respectively, as proposed by their directors.
Given that the NSE is trading at its two-year low indicates that many equities on the NSE are undervalued, offering investors juicy entry opportunities to discerning investors.

Market Outlook
We expect the mixed performance to continue this week, despite CBN governor’s reappointment and expected key economic data, as market players maintain a cautious outlook due to low confidence and liquidity, waiting for major economic triggers. Hence, we advise investors to trade cautiously in the short-term, with their gaze fixed on blue-chip stocks that are selling more than 40% below their 52 weeks high. As we look out for a positive catalyst to drive 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.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
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