NGSE Index Slip 7.43% YTD, As Investor Confidence Slips Lower Ahead Presidential Inauguration

Market Update for May 7
The Nigerian Stock Exchange (NSE) closed lower on Tuesday, wiping away the seeming gains recorded so far in the first few days of May on a high traded volume, following price losses suffered by blue-chip stocks to extend the negative outing on the exchange.

The lingering insecurity and confidence crisis ahead of May 29, 2019 inauguration of President Muhammadu Buhari’s government for a second term, in the midst of economic reforms policy, even as investors await the announcement of a new cabinet, which have further dampened investor confidence. This has not been helped by the falling oil prices due to fear of a slowdown in the global economy owing to the escalating trade war between the U.S and China. Also, the five-year tenure of Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN) ends on June 3, 2019, coinciding with the second term inauguration of President Buhari, a fact that has kept many investors on edge, especially as it regards what to expect from the coming CBN Governor.

While it is almost certain that Emefiele will not be reappointed, just as none of his predecessors has received a second term, in the 20 years since 1999, when the then newly inaugurated President Olusegun Obasanjo, appointed Chief Joseph Sanusi to the top job, to replace Dr. Paul Ogwuma who was governor between 1993 and 1999, unconfirmed sources say the President will name Mrs. Aishah Ahmad the new CBN Governor, the first woman to occupy the position. the sideline waiting to see who replace the outgoing governor come June 4, 2019.
Also of concern to watchers of Nigeria’s economy is her rising debt profile and cost of servicing, even as the 2019 budget awaits Presidential Assent is a serious concern for foreign and local investors.
Trading on the NSE opened on the downside in the morning session, which oscillated in the mid-morning to the afternoon on the selloff in all sectors, resulting in increased the losing momentum before finishing the day lower at 29,096.41 basis points. This was after touching intraday low of 29,091.6bps from its high of 29,208.63bps, which was above the opening figure of 29,197.41bps.
Market technicals for the session were negative and mixed, with traded volume higher than previous day’s in the midst of negative breadth and selling pressure as revealed by Investdata’s daily sentiment report, as selling position was 96% and buy volume, 4% of the total daily transaction volume index of 1.03.
The impetus behind the day’s market performance was weak as shown by Money Flow Index of 38.16 points, from previous day’s 45.48bps, indicating that funds are still leaving the market, as investors wait to see the 2019Q1 GDP and other economic indicators for April as things unfold politically and economically.

Index and Market Cap
The benchmark NSE All-Share Index on Tuesday fell by 100.46bps to close at 29,096.41bps, after opening at 29,197.87bps, representing a 0.34% decline, just as market capitalization dropped by N37.74bn, closing at N10.94tr, compared to its opening value of N10.97tr, which represented 0.34% depreciation in value.
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The downturn for the day was driven by selloffs in Nigerian Breweries, Zenith Bank, UBA, Dangote Flour, Dangote Sugar, Oando, Flour Mills, Honeywell, Transcorp 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 N785.1bn, or 6.70%, from the year’s opening level of N11.72tr.

Bearish Sector Indices
All sectoral performance indices closed red for the session, except the NSE Industrial Goods that closed up by 0.34% due to bargain hunting in Beta Glass. Market breadth was negative as decliners outnumbered advancers in the ratio of 32:11.
Market activities in volume and value were up by 58.73% and 103.97% respectively to 430.27m shares worth N2.83bn, as against the previous day’s 271.08m units valued at N1.39bn. Volume was driven by Courtville, Japaul Oil, Access Bank, UBA and Zenith Bank, as investors continue to digest recently released Q1 number and filter news and rumors in the mills while watching the fiscal space for market sensitive hints.
Beta Glass and Courtville were the best-performing stocks for the day, gaining 10% and 8.33% respectively to close at N62.70 and N0.26 per share, on market forces. On the flip side, Dangote Flour Mill and Ikeja Hotel lost 9.86% and 9.38% respectively, closing at N16.00 and N1.45, on profit taking and market forces.

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.

Meanwhile, the NSE index on the daily time frame is forming a double bottom that supports reversal, but let us wait for 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
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https://investdata.com.ng/2019/05/ngse-index-slip-7-43-ytd-as-investor-confidence-slips-lower-ahead-presidential-inauguration/