Mixed Trading On NGSE, As Low Valuation May Lure Investors Ahead Of March Results

Market Update for June 10
Stocks opened the week lower Monday as the Nigerian Stock Exchange (NSE) composite All-Share index had a mixed session, extending the losing streak to six consecutive days of down market on a ‘sell’ pressure.

The gloomy state of the market reflects the weak economy and dwindling confidence in the whole system following from the fact that the government has consistently failed to champion a new course expected to stimulate the economy with policies and leadership style. This has over the last four years manifested in low productivity, which reflected in the latest decline in GDP to 2.01% in the first quarter of 2019, from 2.34% in Q4 2018. No wonder, Mustafa Chike-Obi, former Managing Director of the Asset Management Corporation of Nigeria (AMCON) and Goldman Sachs executive told newsmen in Lagos on Monday that the Nigerian economy has the capacity to grow at double digits with the right policies and government attitude (READ MORE).

At a time one will expect that government will hit the ground running in this its second four-year term, the Muhammadu Buhari administration continues to delay formation of a cabinet. One would have expected a formidable team of technocrats, not political jobbers, so as to effectively map out strategies and draw a roadmap that will drive productivity for economic growth in conjunction with the monetary policy to pull the economy out of its sluggish momentum to the path of sustainable growth. The desire of the Central Bank of Nigeria (CBN) to stimulate growth through interventions needs a serious commitment from the government to turnaround the economy in no distance time.

The NSE All-Share Index opened on the downside and followed through till the afternoon session, before retracing back marginally after touching intraday low of 30,306.76 basis points, from its high of 30,459.43bps.

Monday’s market technicals were negative in the midst of strong selling pressure, as revealed by Investdata’s Daily Sentiment Report showing ‘sell’ position of 90% and ‘buy’ volume of just 10% of the total daily transaction volume index of 0.84.

The momentum behind the day’s performance was nonetheless strong and flat, despite the down market, with Money Flow Index at 66.14points, from previous day’s 65.44bps, indicating that funds are still entering some stocks, irrespective of selloffs in some positions.

Index and Market Cap
At the end of the day trading the NSEASI shed 109.94bps, closing at 30,322.19bps, after opening at 30,432.13bps, representing 0.36% drop, just as market capitalization shed N48.42bn to close at N13.36tr, from its opening value of N13.4tr which also represented 0.36% value loss.


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The day’s downturn was driven by selloffs and profit booking in stocks like MTN Nigeria, Zenith Bank, Unilever, CCNN, ETI, Dangote Flour, Oando, Wema Bank and Transcorp, among others. This impacted negatively on the Year-to-Date negative position, which rose to 3.53%, just as market capitalization gain stood at N1.45 trillion, or 14.49%, from the year’s opening level of N11.72tr.

Bearish Sector Indices
The sectoral indexes were down, except for the NSE Insurance which closed marginally up by 0.02%, while the NSE Industrial led the losers after shedding 2.35%, followed by Consumer Goods with 0.62%, while Oil/Gas and Banking followed with 0.21% and 0.10% respectively. Market breadth was negative as decliners outnumbered advancers in the ratio of 20:15.

Market activities were down in volume and value traded by 19.04% and 10.75% respectively to 247.39m shares worth N3.48bn, as against previous day’s 305.56m units valued at N3.9bn. The day’s volume was driven by financial services stocks like Zenith Bank, Guaranty Trust Bank, Ecobank Transnational Incorporated, Custodian Investment, and FBNH.

UACN Property and Consolidated Hallmark Insurance were the best-performing stocks as they topped the advancers’ table with 10% gains each to close at N1.65 and N0.22 per share respectively on market forces. On the flip side, CCNN and Unity Bank also lost 10% each, closing at N13.50 and N0.63, on profit-taking, weak numbers, and negative retained earnings.

Market Outlook
We expect mixed performance and downtrend may continue until bargain hunters hit the market again, as discerning investors take advantage of low valuation to rebalance their portfolio ahead of March year-end numbers and second half interim dividend stocks.

They may also take into consideration the expected economic reforms as the new cabinet are set to start running and the plans of Central Bank of Nigeria (CBN) to reduce banks’ participation in government securities while boosting private sector lending to drive economic activities and investment.

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.

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/2019/06/mixed-trading-on-ngse-as-low-valuation-may-lure-investors-ahead-of-march-results/