NGSE Indices Remain Mixed Despite Upward Pull By Large Caps, As Low Volume Persists

Market Update for May 20
Trading activities on the Nigerian Stock Exchange on Monday remained volatile and mixed, consolidating three consecutive days of gains as the trillion cap stocks appreciated in value to support the upside momentum.
The NSE All-Share index opened on a bang in the morning, a situation that was sustained throughout the day, following which it closed higher, touching intraday high of 29,438.95 basis points, from 28,871.93bps on strong sentiments, breaking out the 29,000 psychological lines.
Recall that this recovery move in the last couple of days was triggered by the listing of MTN Nigeria on the exchange, despite the prevailing low liquidity in the equities segment of the financial market.

The National Bureau of Statistics (NBS), on Monday, published Nigeria’s 2019Q1 GDP data, with weak growth of 2.01%, which as observed by analysts represents a slower growth rate than the country’s population at 2.75% (READ MORE). The weak growth has already been reflected by the benchmark NSEASI, given that the stock market, a leading reflector of the country’s economic wellbeing, had in the middle of the period under review signaled a slowdown in economic activities through the generally weak Q1 corporate earnings released by listed companies. The GDP data indicated that the economy is still struggling, despite the relative stability in macroeconomic fundamentals, attractive low stock valuations. The economy is therefore in urgent need a fiscal stimulant to attract more funds into the system, which could come by way of the much awaited ministerial list and economic reform policies of the government as it prepares to begin its second four-year term, to support the much-expected rebound.

Monday’s market technicals were positive and mixed, as volume traded was lower than previous day’s, amidst a negative market breadth and strong buying sentiment as revealed by Investdata’s daily sentiment report, showing a buy volume of 89% and sell positive of 11% of the total daily transaction volume index of 0.76.
The momentum behind the market performance was however weak, despite the upmarket, as shown by the Money Flow Index of 24.27points, from the previous day’s 16.82bps, indicating that funds are gradually flowing in.

Index and Market Cap
The benchmark NSE All-Share index gained 501.47bps to close at 29,373.40bps, after opening at 28,871.93bps, representing a 1.74% growth, just as market capitalization rose by N220.87bn, closing at N12.94 trillion, from its opening value of N12.72 trillion, which also represented 1.74% appreciation in value.
In a bid to douse mounting tension over the piecemeal and even off-market trading of MTN Nigeria shares, management of the NSE, on Monday night took time to explain that the company has indeed broken no post-listing rules, just as it has met its free-float requirement as set out for stocks listed on the premium board (READ MORE).

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Meanwhile, the upturn was, once more, driven by MTN, as well as buying interest in stocks like Dangote Cement, Zenith Bank, Guinness Nigeria, Dangote Flour, FCMB and Wema Bank, among others. This impacted positively on the Year-to-Date loss, reducing it to 6.54%, just as market capitalization gain soared to N1.34tr, or 10.12%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral indices were largely bearish, except for the NSE Insurance and Consumer goods that closed higher by 1.18%, and 0.40% respectively, while NSE Oil/Gas and Banking led the decliners by 1.11% and 1.08% each. Market breadth remained negative as the number of decliners outnumbered advancers in the ratio of 20:17.
Market activities were mixed as volume traded was down 19.94% to 214.42m shares against 267.84m units on Friday, as most investors have their eyes on a piece of the “Yello” cake, for which many had exited many positions and remain on the waiting list. The day’s transaction value rose by 5.43% to N7.93bn, compared to previous day’s N7.52bn. Volume was driven by ICT, banking, and transport service provider stocks like MTN, FBNH, UBA, Nahco, and Guaranty Trust Bank.

McNichols and MTN Nigeria were the best-performing stocks for the session, as they topped the advancers’ table gaining 10% and 9.96% respectively, closing at N0.55 and N119.75 per share, on market forces and sentiment for the newly listed company. On the flip side, Forte Oil and Etranzact lost 9.88% and 9.85% respectively to close at N25.55 and N2.38, purely on profit-taking and market forces. Investors are seemingly re-pricing FO shares appropriately, in view of the divestment of its power asset, which before now, had been the cash cow of the group.

Market Outlook
We expect the recovery driven by MTN to continue as value investors take advantage of the low valuation to rebalance their portfolio ahead of Q2 numbers since the Q1 GDP recorded a slow growth. Also, members of the CBN’s Monetary Policy Committee (MPC) would rise from their two-day meeting today and are likely to maintain status quo or adjust the Cash Reserve Ratio (CRR) downward, to boost banks’ lending to the private sector and thereby drive investment. More importantly, we expect that the government would sign the federal budget without further delay while changing its disbursement and implementation style in 2019 and beyond for good so as to drive the economy.
Investors look to 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
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