Mixed Performance, Speculative Trading, As More Stocks Hit New 52-Week Lows

Market Update for The Week ended October 11 and Outlook for 14-18
It was yet another disappointing week for investors and traders on the Nigerian Stock Exchange last week, as price declines continued, coinciding with the presentation of the 2020 budget estimates by President Muhammadu Buhari to the National Assembly. It was also a week when the President formally inaugurated the Economic Advisory Council, a move some analysts believe should have come earlier than the budget presentation.
The mixed reactions to the budget estimates and negative sentiments since the last trading day of September continued, as the composite NSE All-Share index recorded five straight sessions of losses on selloffs in high cap and blue-chip stocks. The index, therefore, closed lower, extending the four consecutive weeks of a downturn on mixed concerns over monetary and fiscal policies.

The period was also marked by the closure of Nigeria’s borders by the Federal Government without adequate preparation or stimulus to boost domestic economic activities, as food prices jumped by over 68% in less than six weeks, a situation that was worsened by the subsisting low purchasing power. It may, therefore, be safe to expect that the inflation figure for the month of September would likely rise at a faster pace, therefore halting the recent declines that saw the numbers at a three-month low of 11.02% in August.

Movement Of NSEASI
Previous week’s bloodbath on the NSE continued, with the All-Share Index opened for the week’s trading on a negative note, extending the previous session’s loss position. Monday’s trading closed 0.48% lower, a trend that sustained throughout Tuesday, Wednesday, Thursday, and Friday on high selling pressure in highly capitalized stocks, amidst negative sentiments. The benchmark index lost 0.16%, 0.79%, 0.06%, and 0.19% respectively for the period, bringing the week’s cumulative loss to 1.68%, with the index closing at 26,533.78 basis points, from 27,987.45bps it opened. Recall that at the end of the preceding week, the market lost all of 2.48%.
The benchmark index hit a new lower low on persisted selloffs during the period, a situation that was evident on the advancers table which was dominated by low cap stocks, as highly capitalized and blue-chip companies continued to bleed profusely, irrespective of anticipated earnings season ahead. Market breadth for the week closed negative with decliners outnumbering advancers in the ratio of 33:19.

The momentum behind the week’s performance remained weak, despite inching up as shown in the 32.14bp Money Flow Index, compared with 31.99bps in the previous week, indicating that funds entered some stocks despite the sell down. This showed that discerning traders and investors took advantage of the low prices of fundamentally sound stocks to the position in expectation of company scorecards. Also, the Investdata sentiment report for the week revealed negative sentiment with ‘sell’ volume at 91%, while the ‘buy’ position was 9% on a transaction volume index of 0.74.
During the week, the NSE introduced a new pricing methodology, abolishing the graduated price movement model, such that irrespective of share price, price movement across the market can only occur with 100,000 units, with effect from Friday, October 11, 2019.
During the week also, Dangote Flour Mills notified investors of the postponement of its Annual General Meeting till December. Also, during the week, many companies announced their closed period and date of board meetings, preparatory to publishing their quarterly financials.

NSEASI Weekly Time FrameBearish Sectoral Indices
All the sectorial performance indexes were in red, except for the NSE Banking that closed marginally high by 0.14%, while the NSE Consumer Goods led the decliners after losing 3.96%, followed by the Oil & Gas sectors, which shed 3.17%. Next were NSE Industrial Goods and Insurance indices that closed down by 1.76% and 1.65% respectively.
Market transactions for the week in volume and value were up by 113.64% and 247.77% respectively, as investors traded 1.41bn shares worth N31.96bn, compared to previous week’s 660.65m units valued at N9.19bn. This volume was mainly driven by Guaranty Trust Bank, Access Bank, and FBN Holding.
ABC Transport and Africa Prudential were the best-performing stocks for the week, topping the advancers’ table with 29.4% and 13.8% gains respectively, closing at N0.44 and N4.00 per share on market forces and earnings expectations. On the flip side, Guinness Nigeria and PZ lost 10.8% and 10% respectively, closing at N29.35 and N6.30, on selloffs.

Market Outlook
We expect a mixed performance in the new week, given the fact that many stocks are now trading at their 52-week lows and the possibility of a return of speculative traders ahead of the release of Q3 earnings results. At the moment, there is no positive catalyst to drive the domestic macroeconomy, at a time more funds are flowing towards fixed income instruments. However, discerning investors should take advantage of the current low stocks valuation to position for the earnings season, and the expected consumer price index. It is noteworthy that the market is selling at a discount to give high upside potential while awaiting a positive statement and/or policy direction from the Economic Advisory Council (EAC).
We would, however, not overlook the possibility of a bargain-hunting motive supporting positive performance, especially with many fundamentally sound stocks remaining under-priced. With a dividend yield of major blue-chips continuing to look attractive in recent weeks, we expect speculative trading to shape the market’s direction, despite the seeming negative outlook.

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