NGSE Downtrend May Slowdown On Imminent Return Of Bargain Hunters

Market Update for June 17
Trading on the Nigerian Stock Exchange (NSE), suffered another setback Monday, starting off the week on a negative note, despite the listing of 1.88bn shares to those of Ellah Lakes Plc (READ MORE). Monday’s loss reversed previous session’s seeming upmarket as sell-offs in high cap stocks persisted in the midst of low liquidity, dwindling confidence and unclear economic direction with the delay in announcement of a new cabinet, three months after the re-election of President Muhammadu Buhari for a second and final four-year term in office.

Recall that the lack of economic direction and late appointment of ministers in the administration’s previous dispensation was part of the factors that resulted in a full-blown recession. Already, there are tell-tale signs of a repeat situation as shown by economic indices.
Also on Monday, Nigeria’s National Bureau of Statistics .released the consumer price index, which rose for the second consecutive month, with May inflation rate at 11.40%, from 11.37% in April (READ MORE). Note that growth in the nation’s Purchasing Managers’ Index (PMI), according to to the latest report has slowed down, expanding by 57.8 points from 57.7 points in the previous month.
The quality of cabinet members and policy articulation will, expectedly, show the government’s focus and whether Nigerians would see tangible economic reform policies that can propel national productivity and create jobs.

The NSE index opened Monday, trading on a slight upside up to the mid-morning session before pulling back between the midday and afternoon, after touching intraday low of 29,933.25 basis points from its high of 30,087.86bps. It then closed the day lower at 29,937.83bps, after breaking down the 30,000 psychological line amidst negative market breadth.
Monday’s market technicals were negative and mixed with a higher volume traded than the previous day’s amidst high selling pressure that favoured the bears. This was confirmed by Investdata’s Daily Sentiment Report showing ‘sell’ position of 97% and ‘buy’ volume of just 3% of the total daily transaction volume index of 7.75.
The momentum behind the day’s performance was weak and down, reflecting the continued down market, as Money Flow Index read 25.19points, a sharp drop from previous day’s 49.07bps, indicating funds are leaving the market.

Index and Market Cap
The benchmark NSE All-Share index lost 110.37bps, closing at 29,937.83bps, after opening at 30,046.73bps representing 0.37% decline. Market capitalization lost N40.63bn, closing at N13.19tr, from its opening value of N13.27tr, or 0.31% value loss. The difference resulted from the news shares listed for Elah Lakes.
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The session downturn was due to the continued selloffs in high cap stocks like Dangote Cement, MTN Nigeria, Guaranty Trust Bank, Guinness Nigeria, UACN, UBA, and Oando, among others. This raised the Year-to-Date negative position of the NSE to 4.75%, just as market capitalization gain dropped to N1.38tr, or 13.87%, from the year’s opening level of N11.72tr.

Bullish Sector Indices
All sectoral indexes closed green, except for the NSE Industrial Goods which closed 0.45% red, while the NSE insurance led the advancers after gaining 0.49%. It was followed by consumer goods with 0.38%, while Oil/Gas and Banking notched 0.30% and 0.16% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 20:16, just as market activities were up in volume and value traded by 1,867.26% and 36.05% to 2.86bn shares worth N3.92bn from the previous day’s 145.28m units valued at N2.83bn. The day’s volume was driven by financial services and industrial stocks like Wema Bank, Fidelity Bank, Thomas Watt, Zenith Bank, and Access Bank.
The best-performing stocks for the day were Prestige Assurance and Forte Oil as they topped the advancers’ table with 10% and 9.86% respectively to close at N0.55 and N32.30 per share respectively on market forces. On the flip side, Royal Exchange and Nahco lost 8.33% and 6.35% respectively, closing at N0.22 and N2.80, on market forces and profit-taking.

Market Outlook
We expect mixed performance and the downtrend to slowdown as bargain hunters are likely to hit the market any moment from now, attracted by the low stock prices to position for 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 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
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https://investdata.com.ng/2019/06/ngse-downtrend-may-slowdown-on-imminent-return-of-bargain-hunters/