Investors Lie Low, Await Fiscal Policy Direction To Reposition Portfolio

Market Update for June 18
The nation’s equity market on Tuesday had a mixed, volatile and negative session, extending the bearish stance on a huge traded volume that was spiked by cross deals in Wema Bank and Zenith Bank. Buy and sell volume indicator revealed a sell position of 100% forWema Bank and ‘buy’ volume of 100% in Zenith Bank at the end of the session.
The continued selloffs in bellwether stocks like Dangote Cement, MTN Nigerian, Nestle, Guaranty Trust Bank, and Nigerian Breweries, remains a cause for serious concern among investors because it is a sign that smart money is still exiting these stocks. Also worrisome is the fact that market and economic fundamentals remain weak and in desperate need of a stimulant.

For now, there is seemingly no direction for the economy, as it remains rudderless with the government yet to form its economic team. The administration also seems in no hurry to roll out reform policies expected to drive economic activities and boost revenue for the implementation of the 2019 budget at a time the deficit level is rising.
As noted by members of the Monetary Policy Committee (MPC) in their personal comments at the meeting in May, the economy is yet to feel the impact of the rate cut, with the cost of funds still high in the face of an uptick in consumer price index over the past two months (READ MORE).

There is an urgent need for effective coordination of fiscal and monetary policies, given the stagnation in the economy, to prevent it from sliding into recession. Recall that in Q1 2019, Nigeria’s GDP fell to 2.01% from 2.34% in Q4 2018. This is why the government must realise that this is no time to gamble with the economy again.
Meanwhile, the day’s trading started with the Nigerian Stock Exchange (NSE) index gaping down in the morning, a situation that was sustained throughout the session as sell pressure hit the high cap stocks. This caused the index to touch intraday low of 29,797.11 basis points from its high of 29,936.33bps, before retracing up slightly to finish the day at 29,818.80bps on flat market breadth.
Market technicals were negative and mixed as volume traded was higher than the previous day’s, amidst of positive breadth and negative sentiment as revealed byInvestdata’s Daily Sentiment Report showing a ‘sell’ position of 84% and ‘buy’ volume of just 16% of the total daily transaction volume index of 6.49.

The impetus behind the day’s performance was weak and seriously down, as Money Flow Index read 11.98points, a decline from previous day’s 25.19bps, indicating funds are leaving the market and some stocks.

Index and Market Cap
At the end of the session, the All-Share index shed 117.50bps, closing at 29,818.80bps, after opening at 29.937.83bps representing 0.39% drop. Similarly, market capitalization lost N51.79bn to close at N13.14tr, from its opening value of N13.19tr, which represented 0.39% drop.
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Value loss suffered by Okomu Oil, International Brewery, Forte Oil, Honeywell, Wema Bank, and Transcorp, in addition to the big cap stocks dragged the market down to impact negatively on the Year-to-Date loss position which rose to 5.13%. Market capitalization gain also dropped to N1.30tr, or 13.46%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Consumer and Industrial Goods which closed lower by 1.22% and 0.04% respectively, while the NSE insurance led the advancers after gaining 1.72%. It was followed by Oil/Gas with 0.54%, while Banking was next with 0.32%.

Market breadth was slightly positive as advancers outnumbered decliners in the ratio of 21:20, just as market activities were up in volume and value traded by 1.90% and 191.47% to 2.91bn shares worth N11.22bn, from previous day’s 2.86bn units valued at N3.92bn. The day’s volume was driven by financial services stocks like Wema Bank, Zenith Bank, Access Bank, and Guaranty Trust Bank.
Champion Brewery and NEM Insurance were the best-performing stocks for the day as they topped the advancers’ table with 10% and 8.78% respectively to close at N1.32 and N2.23 per share respectively on market forces. On the flip side, Okomu Oil and ABC Transport lost 10% each to close at N66.48 and N0.24 respectively on profit-taking and market forces.

Market Outlook
The bearish trend and mixed performance may slow-down on a positive statement or move by the government on the economy and expected to reposition by bargain hunters at this current low stock prices in anticipation of March year-end earnings reports and second half interim dividend.
They may also take into consideration the expected economic reforms as the new cabinet are expected on board as Central Bank of Nigeria (CBN) had started rolling out plans and guidelines on how to lend to the private sector to boost economic activities and investment in different industries.

Investors look to government’s policy direction as the market faced low liquidity problems in pre and post-inauguration 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.
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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