NGSE Rebounds Amidst Quarter-end Window Dressing, Low Price Attraction

Market Update for June 27
Thursday’s session on the Nigerian Stock Exchange (NSE) was ‘supper’ volatile and mixed, with the benchmark All share index gyrating seemingly to music audible only to the initiated. The index, which was 1.14% down minutes to the end of the session closed higher on positive sentiments for highly capitalized stocks, halting three trading days of bear run. Despite the dwindling confidence, the index broke down another major support level of 29, 609,00 basis points. It tested the lower second support level of 29,224.23bps, before rebounding to take off the first support level that became resistant, as the industrial goods and oil sectors gave it a push to the upside, helping it resist another decline.

Nevertheless, the seeming rebound was driven by market forces, as players and bargain hunters took advantage of the persistent low valuation of listed equities to reposition their portfolios for Q2 earnings reporting season and second half of the year.
The market expects the announcement of the government’s new cabinet, economic team and a blueprint from the fiscal authority to kick off implementation of the 2019 budget. President Muhammadu Buhari just inaugurated the board of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) to formulate policies and strategies to boost revenue collection for efficient allocation to the various tiers of government.
The current administration has among major themes of its development agenda, diversification of the economy from crude oil. This has resulted in the encouragement given to non-oil exports, as part of the Central Bank of Nigeria (CBN) placed a ban on importers of 42 items from accessing its official foreign exchange window.

We note that the possible return of Value Added Tax on every equities transaction on the Nigerian Stock Exchange could have a negative impact on a market that has suffered losses since 2014. We recall that the waive was to encourage greater participation in the market. Since then, however, there has been very poor government intervention or policies to help, even when the same government continues to crowd out other borrowers as it seeks repeated to fund the annual budget due to its dwindling revenue. If we are going anywhere as a nation economically, this is the very time the fiscal and monetary authorities should work together to actualise the much talked about double-digit growth potential of Nigeria’s economy.

Meanwhile, the NSE’s benchmark index opened for the day’s trading on a gap down, a situation that lasted through mid-morning. Gradual retracement started in the midday to early afternoon, until finally, the session closed higher at 29,749.34bps on a low traded volume. This, however, was after the index touched intraday high of 29,756.79bps from its low of 29,224.23bps, being the first support resistance level.

Market technicals were positive and mixed as volume traded was lower than previous day’s, amidst positive market breadth, with persistent high buying pressure as revealed by Investdata’s Daily Sentiment Report showing a ‘buy’ position of 99% and ‘sell’ volume at just 1% of the total daily transaction volume index of 0.66.
The momentum behind the day’s performance was seriously weak as Money Flow Index showed another new three-year low of 5.45points, from previous day’s 5.50bps. This is an indication that funds are yet to start returning to the market, which, therefore, suggest that Thursday’s rebound is weak and fragile, especially with the prevailing low liquidity.

Index and Market Cap
At the end of Thursday trading, NSE All-Share Index gained 140.35bps, closing at 29,749.34bps, after opening at 29.609.00bps, representing a 0.47% growth, just as market capitalization was up by N61.85bn to close at N13.11tr, from its opening value of N13.05tr, which also represented 0.47% value gain.

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Thursday’s upturn was driven by the seeming buying interest in high cap stocks like Dangote Cement, Nestle, MNTN, Seplat, Guaranty Trust Bank, Unilever, CCNN, International Brewery, Lafarge Africa, UBN, UACN, Access Bank and Eterna, which impacted positively on the Year-to-Date loss position, reducing it to 5.35%. Market capitalisation gain also rose to N1.38tr or 11.89%, from the year’s opening level of N11.72tr.

Bullish Sector Indices
All the sectoral performance indices were green, except for NSE banking which closed 0.10% in the red. The NSE industrial goods index led the advancers, gaining 2.64%, followed by oil/gas with 1.77%, next was consumer goods and insurance with 0.74% and 0.33% respectively.
Market breadth turned positive as advancers outnumbered decliners in the ratio of 26:18, just as market activities were mixed as volume traded was down by 23.57% to 301.18m shares, compared to the previous day’s 394.06m units, while transaction value rose by 53.82% from previous day’sN3.27bn to N5.03bn. Volume was driven by transactions in financial services and conglomerates stocks like Transcorp, Guaranty Trust Bank, Access Bank, FBNH and Zenith Bank.

CCNN and Boc Gases were the best-performing stocks, after topping the advancers’ table, gaining 10% and 9.84% respectively to close at N13.20 and N4.13 per share, on low price attraction and market forces respectively. On the flip side, Forte Oil lost 9.87%atN27.40 each, despite the assurance by the new majority shareholder that there are no plans to buy-out other investors preparatory to delisting from the NSE. Berger Paints followed, after shedding 9.79%, closing at N6.45 per share on profit-taking.

Market Outlook
Being the last trading day of the month, we expect the mixed performance as the end of quarter window dressing by fund managers and portfolio repositioning and balancing for month end and the Q2 earnings reporting season to continue. As bargain hunters are likely to hit the market any moment from now, while discerning investors are taking advantage of low valuation to position ahead of March year-end numbers and second half interim dividend stocks.
They may also take into consideration the expected economic reforms as government announces its much-awaited new cabinet, just as plans by the Central Bank of Nigeria (CBN) to reduce banks’ participation in government securities is expected to boost private sector lending to drive economic activities and investment.
There is also the likely end of month trading account balancing in the midst of portfolio repositioning in expectation of interim dividend in Q2 numbers, especially banking stocks.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
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