NGSE Fails To Confirm Rebound On Tuesday, Despite Speculative Moves By Investor

Market Update for August 20
The Nigerian Stock Exchange (NSE) All-Share index failed to confirm previous day’s rebound, amidst volatility and mixed trading that dominated Tuesday’s session with the composite All-Share index closing lower on a low traded volume. This followed price depreciation by telecommunications giant MTN Nigeria, which has become the most capitalized equity on the bourse.
Despite the day’s mixed performance, there was increased buying interest in some stocks that had suffered huge losses in recent times as bargain hunters cashed in on the low prices to accumulate ahead of the inauguration of the new federal cabinet and the expected policies from fiscal and monetary authorities that could stimulate the much needed economic growth and development.

With real governance about to kickoff with the ministers being assigned portfolios, it expected that the management of economic information and pronouncements thereby addressing investors concerns about the safety of their capital and returns on investment.
As we earlier stated, is very important that there is effective coordination between the fiscal and monetary authorities, if the economy will make any headway going forward. This should come in the form of constant synergy among policymakers to boost confidence in the system again.
Meanwhile, the All-Share index opened Tuesday on a slight downside, a situation that lingered till mid-morning and oscillated between midday and early afternoon as speculations continued on the big banking stocks ahead of their interim dividend. This lifted the index to its intraday high of 27,217.88 basis points from its low of 26,938.15bps, before finally sliding down to close the session at 27,059.62bps on mixed sentiments.
Market technicals for the session were positive but weak, with traded volume and deals dropping lower than that of Monday, just as breadth favoured the bulls on a mixed sentiment, as revealed by Investdata’s Daily Sentiment Report, showing ‘buy’ volume at 43% and sell position of 57% on total daily transaction volume index of 1.02.

The impetus behind the day’s performance remained seriously weak and flat as Money Flow Index read 8.45 points, down from the previous session’s 8.79bps, an indication that new funds did not enter the market, but the movement of buyers and sellers in some stocks amidst the persistent low liquidity and profit-taking in MTNN.

Index and Market Cap
The benchmark index at the end of trading, shed 57.27bps to close at 27,058bps, after opening at 27,115.89bps, representing a 0.21% drop, just as market capitalization lost N27.91bn to close at N13.19tr, from an opening value of N13.21tr which also represented 0.21% decline in value.
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Tuesday’s downturn resulted from the profit-taking in stocks like MTN Nigeria, UBN, Conoil, Cutix, and PZ Cussons, among others. This impacted slightly on the NSE’s Year-to-Date loss, raising it 13.91%, just as YTD market capitalization gain fell to N1.4tr or 12.39% from the year’s opening level of N11.72tr.

Bullish Sector Indices
All the sectoral performance indexes closed green, led by Banking, after gaining 1.88%, followed by the Oil/Gas index with 0.99%, while Insurance, Industrial and consumer goods notched 0.59%, 0.56%, and 0.22% respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 27:10; despite the down market as traded volume and value dropped by 16.40% and 20.38% respectively to 209.62m shares worth N3.24bn, from the previous day’s 250.74m units valued at N4.17bn. Volume was driven by trades in financial services and conglomerates stocks such as Transcorp Plc, Guaranty Trust Bank, Zenith Bank, Ecobank Transnational Incorporated and FBN Holdings.

The best-performing stocks for the session were Transcorp and Oando that topped the advancers’ chart, after gaining 10% each, closing at N0.99 and N3.85 per share, on low price attractions and market forces. On the flip side, Cutix and Union Diagnostic which lost 9.62% and 8.33% respectively to close at N1.41 and N0.22 on profit-taking.

Market Outlook
This mixed performance will continue as bargain hunters reposition, taking advantage of the seeming improvement in economic indices released recently, as well as the corporate earnings that revealed the true position of listed companies. Also, long-term investors are reshuffling their portfolios in expectation of interim earnings reports of dividend-paying companies.
The rebound of the NSE is yet to be confirmed, as Tuesday’s outing was negative, despite the speculative move by market players that jump into any new position, especially the stocks that are selling at a discount.
Discerning investors should target value stocks considering the current low valuation as they position for dividend income and capital gains, especially as the market’s Price to Earnings ratio remains attractive at 5.45x, which is well below the 8.24x average of its peers and its 9.56x five-year average. The current situation has revealed the existence of value and the high upside potentials for a rally. But then, wait to confirm reversal before jumping into a new position.

Investors should also take into consideration the expected economic reforms as the government is set to assign portfolio to the minister-designates, given that the Central Bank of Nigeria (CBN) had earlier rolled out plans to boost productivity and investment by instructing the banks to lend more to the private sector. This is aimed at reducing banks’ participation in government securities and lending more to the private sector to drive economic growth.
There is also the likely impact of portfolio repositioning for the last quarter of the year ahead of Q3 financials in the midst of analyzing Q2 numbers and unfolding political events.

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