Bleeding NGSE Keeps Investors Guessing About True Market Bottom

Bleeding NGSE Keeps Investors Guessing About True Market Bottom

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Post Views: 99 Market Update for September 12, 2018 The nation’s bourse was recorded very high losing momentum at the midweek’s trading session as man...

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Market Update for September 12, 2018

The nation’s bourse was recorded very high losing momentum at the midweek’s trading session as many high cap stocks made new 52-week lows on the strength of panic and massive selloffs that resulted in its indicators suffering the biggest cuts in recent times.
Analysts generally believe that the lingering free fall in equity prices is an indication that something is seriously wrong with the NSE’s market structure, just like the Nigerian economy and polity.
Investdata believes that the failure of the regulators- both the Securities & Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to follow through with the decision to appoint market makers during the 2007/2008/2009 market meltdown continues to haunted the market. Added to this is the near absence of the financial market regulators, who should fashion measured to stem the tide and instead stimulate recovery, growth and then development; while the government and its economic managers also are not putting measures in place to remedy the ugly situation. In all of these, they all forget that every stock market is a leading indicator of what is happening in the nation, especially in relation to business and economy.
The biggest problem remains that the Nigeria’s SEC has continued to be managed without a board for so many years. The last board constituted by the then outgoing government of President Goodluck Jonathan and led by Peter Obi, former Governor of Anambra State in 2015, was dissolved without a replacement. Instead the SEC continues to remain a department of the Finance Ministry, with the Minister single-handedly taking decision that should have been thought-through by duly appointed board members. Yet the government continues to harp on good corporate governance by companies. Since the SEC has recorded more acting than substantive Directors-General in the past four years or more, there has been poor policy follow-throughs, including the need to encourage more domestic retail investors instead of foreign investors that exit at the slightest unfavourable condition as if Nigeria will stop existence.
All of these, added to the government’s focus on politics at the detriment of economic growth and development and the failure to instill confidence, thereby making it difficult for many market players to know when a real bottoming out will occur. Already, many who had adopted the averaging down method now have their capital tied down at a time no fresh fund is entering the market due to heightened political risk and low confidence level.
Back to the market, traders and investors seem to agree on the general direction as virtually all active equities spent the better part of Wednesday taking full offer positions to confirm the dwindling confidence level in the nation’s economy and politics. Since mid-January, these twin monsters had impacted negatively on the stock prices, despite the seeming strong fundamentals of listed companies.
Trading activities on Wednesday opened with the NSE’s Composite All-Share index having a sharp downside movement that lasted throughout the session to revealed heavy sell-off among highly capitalized stocks. These had been foreign and institutional investors’ toast before now. The black day resulted from huge losses suffered by Dangote Cement, Nestle, the recent battled Stanbic IBTC, CCNN Zenith Bank and Flourmills. Also, the share prices of Access Bank and UBA were adjusted for interim dividend offered by their boards.
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Market technicals for midweek were negative and weak with high selling pressure on above recent average traded volume and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 98% and ‘buy’ position at 2%. Volume index was 1.08 of the day’s total transactions.
The force behind the day’s market performance was weakened further, as shown in the money flow index at 32.31bps, down slightly from previous day’s 32.41bps, indicating that funds are still leaving the market as high cap stocks nose-diving further in the midst of low liquidity.

Index and Market Cap
NSE Index for the day was lower to break down the psychological line of 33,000 mark, losing 1,156.38 basis points, closing at 32,292.17bps, after opening at 33,449.17bps, representing a 3.46% decline, just as market capitalisation lost a significant N422.17bn, closing at N11.79tr from N12.21tr, representing 3.46% value loss.
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Downturn was impacted by huge sell offs in medium and high cap stocks like Dangote Cement, Nestle, Nigerian Breweries, Zenith Bank, Access Bank, UBA, Forte Oil, Dangote Sugar and others that further impacted negatively on the NSE’s Year-to-Date return now at 15.56%. While market capitalization for same period shed N1.82 trillion that represents 13.34% below the year opening value.

Bearish Sectoral Performance
Sectoral performance maintained bearish posture for the day, except for the NSE Oil/Gas index that closed green, just as market breadth was negative with decliners outnumbering advancers in the ratio of 37:10 to continue six days of down market.
Market activities in volume and value terms were up 79.40% and 344.23% respectively as 246.91m shares worth N6.93bn were traded, compared to previous day’s 137.63m units valued at N1.56bn.
Law Union and Skye Bank were the best performing stocks, topping the advancers’ table 9.1% and 8.8% respectively, closing at N0.60 and N0.61 per share, purely on their low-price sentiment. On the flip side, Universal Insurance and CCNN were the worst, shedding 10% and 9.9% of their opening value respectively to close at N0.27and N27.86 on market trend.

Market Outlook
We expect the market to continue in this direction until policy statement is made with new economic strategies to reactivate an economy that is already on a slowdown, rather than just looking at the rising oil price at the international markets to expand the nation’s debt profile. The ongoing volatility is likely to persist as bargain hunters take advantage of the low-price regime, in the midst of continued selloffs and political risk, especially as shadow elections by political parties kick off any moment from now. We also expect the National Bureau of Statistics (NBS) to publish the inflation data for August in the coming days.
Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released has given basic insights into companies’ earnings power that are likely to drive prices and determine the market valuation.
Investors should review their positions in line with investment goals, strength of the company’s numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.

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Ambrose Omordion
CRO|Investdata Consulting Ltd

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