NGSE Turns Negative Again, Awaits Fiscal Stimulant For Economic Growth

Market Update for July 1
Trading for the month of July started out on the Nigerian Stock Exchange Monday negative and volatile, reversing the previous day’s positive sentiment on low traded volume. It was a return to the old ways, as cautious trading resurfaced after the end of quarter window dressing by players ahead of the half-year earnings reporting season.

The increasing number of companies notifying the exchange of their closed period in view of their board meetings to avoid insiders from taking advantage of any privileged information. This also signals that the quarterly scorecards of these companies are underway. The performance of these companies are factors that could change the current downtrend. But this can happen if only the numbers beat market expectation to trigger the all expected rally in a mixed economy. But, it may be a tall order generally, however, given the numbers released by companies that released their score-cards on Monday.

It is however expedient at this time for the Federal Government deliberately stimulate economic growth and thereby avoid another recession under this All Progressives Congress (APC) administration by doing the needful. This government must not allow party or political intrigues cloud its vision of delivering the dividend of democracy promised to Nigerians.

Meanwhile, trading on the first day of the week and month started on the downside in the morning session and was sustained into the afternoon as highly capitalized stocks suffered losses forcing the index to touch intraday low of 29,598.82 basis points from 29,966.88bps. It thereafter retracted up slightly to finish the session at 29,614.61bps, a situation that wiped away gains recorded in the last two days of June.

Monday’s market technicals were negative and mixed as volume traded was lower than previous day’s, despite the positive market breadth and high selling pressure as revealed by Investdata’s Daily Sentiment Report. The day’s ‘sell’ position was 94% and ‘buy’ volume 6% of the total daily transaction volume index of 0.24.
The energy behind the day’s performance was seriously weak as Money Flow Index ranged along the new three-year low of 4.86 points, from previous day’s 4.79bps. This is an indication that funds are not entering the market as reflected in the volume traded and other market data that revealed the prevailing low liquidity.

Index and Market Cap
NSE All-Share Index at the end of Monday’s trading lost 352.26bps, closing at 29,614.61bps, after opening at 29.966.83bps, representing a 1.18% drop, just as market capitalization was down by N155.15bn to close at N13.05tr, from its opening value of N13.21tr, which also represented 1.18% value loss.

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The day’s downturn was driven by selloffs and profit taking in high cap stocks like Dangote Cement, Guaranty Trust Bank, Zenith Bank, NB, Unilever, International Brewery, Dangote Flour, UACN, FCMB, Honeywell (READ MORE) and Transcorp, which had a negative impact on the Year-to-Date loss position, increasing it to 5.78%. Market capitalisation gain also dropped to N1.33tr or 11.34%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indices for the day were largely bearish, except for NSE Oil/Gas and Insurance that closed higher at 0.47% and 0.41% respectively. The NSE Banking index led the decliners, after losing 3.05%, followed by consumer goods with 1.75% and next was industrial goods with 0.17%.

Market breadth was positive as advancers outweighed decliners in the ratio of 21:16, while market activities were down in volume and value traded by 56.74% and 78.94% respectively. Investors traded107.44m shares worth N1.14bn as against the previous day’s 248.36m units valued at N5.40bn.This volume was driven by transactions in financial services and conglomerates stocks like Transcorp, FBNH, Zenith Bank, Access Bank, and Guaranty Trust Bank.

The best-performing stocks for the session were Cornerstone Insurance and NPF Microfinance, after topping the advancers’ table, with gains of 10% and 8.57% respectively to close at N0.22 and N1.14 per share, on market forces and sentiment respectively. On the flip side, Redstar Express and Transcorp lost 10% and 9.73% respectively to close at N4.95 and N1.02 each, on market forces, despite the 43 kobo dividend announced and low price attraction of the conglomerates respectively.

Market Outlook
Despite the Monday’s down market, we expect bargain hunters and traders to take advantage of the quarterly reporting season that will kick off any moment in this month of July. While discerning investors should target value stocks considering the low valuation to position for dividend income from the just concluded March year-end account, ahead of interim dividend from the half-year financials.

They may also take into consideration the expected economic reforms as government announces its much-awaited new cabinet, just as Central Bank of Nigeria (CBN) had rollout it plans to boost productivity and investment by lending to the private sector. As it tends to reduce banks’ participation in government securities.
There is also the likely impact of portfolio repositioning for the second half of the year in the midst of expected Q2 numbers, especially banking stocks.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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