NGSE Indicators Weaken Further, But Investors Upbeat Ahead Of MTN Nigeria Listing

NGSE Indicators Weaken Further, But Investors Upbeat Ahead Of MTN Nigeria Listing


Post Views: 370 Market Update for May 15 It was yet another bearish and volatile session on the Nigerian Stock Exchange at the midweek, as selling pre...

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Market Update for May 15
It was yet another bearish and volatile session on the Nigerian Stock Exchange at the midweek, as selling pressure persisted, extending the eighth consecutive day of negative outing, reflecting the effects of the lingering confidence crisis and dwindling liquidity in the market since the exit of smart money from the market.
Also, the removal of four Nigeria stocks from the Morgan Stanley Capital International (MSCI) has triggered sell-offs in the affected stocks by foreign investors while rebalancing their portfolio.
The sustained drop may also not be unconnected, to some extent, to the sell down by many market players preparatory to Thursday’s listing by way of introduction of the 20.35bn ordinary shares of MTN Nigeria at N90.00 each on the NSE.
This is expected to boost market liquidity and reduce the heavy influence of Dangote Cement, which alone accounts for a third of the capitalization, on the general performance index of the Nigerian bourse. The company looks good for investment consideration, given the nature of its service, especially now that the world has gone digital. Also, while the Q1 figures released to make its investment case, the post-listing numbers will determine to a large extent, if investors will buy more, hold or sell. Consequently, we advise investors to trade very cautiously, while those who do not have the funds now should wait.
Also on Wednesday, the National Bureau of Statistics (NBS) published the April Consumer Price Index, showing that inflation rate heightened during the month, as prices of food items rose higher than the prior month (READ).
The NSE All-Share index started the day marginally upside and pulled back at the midday to afternoon sessions after touching intraday low of 28,282.30 basis points from a high of 28,433.39bps before finishing the day at 28,286.08bps on negative sentiments.
Midweek’s market technicals were negative, as volume traded fell lower than previous day’s, amidst negative market breadth and high selling pressure as revealed by Investdata’s daily sentiment report, showing a sell position of 97% and buy volume of 3% of the total daily transaction volume index of 0.48.
The momentum behind the day’s market performance was very weak as shown by the Money Flow Index of 8.62 points, from previous day’s 8.34bps, indicating that funds had left the market amidst continued sell-offs.
Meanwhile, the investing community continues to fix their gaze on government economic reform policies that will trigger all expected economic productivity in the new dispensation as events unfold in the economic and political fronts. We note the comment by Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), on Wednesday, that the effects of the various interventions by the apex bank would become manifest in two years (READ MORE). The assurance by Emefiele, who was responding to questions while being screened for a second and final term of five years, could happen faster yet if the Federal Government supports with complementary and economy stimulating policies, rather than the continued sloganeering.

Index and Market Cap
On Wednesday the composite NSEASI lost 136.68bps to close at 28,286.68bps, after opening at 28,422.78bps, representing a 0.48% decline, just as market capitalization went down by N51.35bn, closing at N10.63tr from its opening value of N10.68tr, which also represented 0.48% value depreciation.
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The day downturn was driven by sell-offs in stocks like Dangote Cement, Forte Oil, CCNN, Access Bank, Fidelity Bank Wema Bank, Dangote Flour and Wapic Insurance, among others. This impacted negatively on the Year-to-Date loss, which heightened to 10%, just as market capitalization decline soared to N1.98tr, or 9.43%, from the year’s opening level of N11.72tr.

Sector Indices
All the sectoral performance indexes were in red, with NSE industrial goods leading the decliners after shedding 2.31%. Market breadth turned negative as the number of decliners outnumbered advancers in the ratio of 17:16.
Market activities were down in volume and value by 11.66% and 22.84% respectively to 176.741m shares worth N2.08bn as against the previous day 200.09m units value at N2.69bn. Volume was driven by financial services and conglomerates stocks, Access Bank, UACN, UBA, GuarantyTrust Bank and Zenith Bank.
Chams and ABC Transport were the best-performing stocks, topping the advancer table with a gain of 9.09% and 8.00% respectively, closing at N0.36 and N0.27 per share, on market forces. On the flip side, WAPIC and Forte Oil lost 10% and 9.78% respectively to close at N0.36 and N31.50, purely on market forces and profit-taking.

Market Outlook
We expect a slowdown and mixed performance to continue as value investing by discerning investors takes advantage of the low valuation to rebalance their portfolio ahead of the release by the National Bureau of Statistics (NBS) of the Q1 GDP data, alongside the MPC meeting holding on May 20 and 21. More importantly, we expect that the government’s disbursement and implementation style in 2019 and beyond will change for good so as to drive the economy.
Investors look to government’s policy direction as the market faces low liquidity problems in the ongoing Q1 earnings reporting season, vis-à-vis market and economic fundamentals.
The drop in prices of major blue chips in recent times has created entry opportunities, following which we expect speculative trading to shape the market direction going forward.
The ongoing volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on political space and ongoing quarterly earnings position and post-election market dynamics. Investors should review their positions in line with their investment goals, the strength of the company 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 to guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467