Volatility May Linger On NGSE, Amidst Portfolio Rebalancing Ahead Of May 29

Volatility May Linger On NGSE, Amidst Portfolio Rebalancing Ahead Of May 29


Post Views: 225 Market Update for May 14 Stocks again declined further on the Nigerian Stock Exchange (NSE), Tuesday, remaining on the negative path, ...

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Market Update for May 14
Stocks again declined further on the Nigerian Stock Exchange (NSE), Tuesday, remaining on the negative path, despite the seemingly positive market breadth and buying interest as revealed byInvestdata’s daily sentiment report.
Buy volume stood at 23% and sell position, 77% of the total daily transaction volume index of 0.54.
The worsening trade dispute between U.S and China has rattled investor confidence and sentiment as the global economic outlook remains unclear, just as an absence of major economic triggers in Nigeria have kept foreign and local investors on the sidelines. They are waiting and watching to see how the expected new economic managers and policymakers plan to boost productivity that will drive development and growth with their reforms and action.
Trading on Tuesday was very volatile and mixed as the NSE All-Share index opened on the downside in the morning and oscillated between the mid-morning to afternoon sessions. This was after touching intraday low of 28,398.96 basis points from a high of 28,535.31bps on slightly improved demand for banking, insurance and oil stocks, before closing the session at 28,422.76bps.
Market technicals for the day were negative and mixed, with volume traded lower than previous day’s, while market breadth was in favour of the bulls.
Energy behind the day’s market performance was very weak as shown by the Money Flow Index of 8.34 points, from previous day’s 15.47bps, indicating that funds had left the market amidst continued sell-offs by foreign and domestic institutional investors waiting on the sidelines to see monetary and fiscal Policy slant in the new dispensation as events unfolds in the economic and political fronts.

Index and Market Cap
At the end of Tuesday’s trading, the benchmarkNSEASI shed 61.68bps to close at 28,422.76bps, after opening at 28,484.44bps, representing a 0.22% drop, just as market capitalization lost N23.17bn, closing at N10.68tr from its opening value of N10.7tr, which also represented 0.22% value loss.

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The session’s downturn was driven by sell-offs in stocks like Nestle, Seplat, ETI, Lafarge Africa, Dangote Sugar, and Honeywell, among others. This impacted negatively on the Year-to-Date loss, which heightened to 9.57%, just as market capitalization decline soared to N1.47tr, or 8.99%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bullish except for the NSE Consumer and Industrial Goods that closed lower as sell-offs persisted in both sectors. Market breadth turned positive as the number of advancers outweighed decliners in the ratio of 20:16.
Market activities were down in volume and value by 6.8% and 3.4% respectively to 200.09m shares worth N2.69bn as against the previous day 214.68m units value at N2.78bn. Volume was driven by financial services stocks GuarantyTrust Bank, Zenith Bank, Access Bank, UBA and FBNH.
Neimeth Pharm and Courtville were the best-performing stocks, topping the advancer table with a gain of 9.09% and 8.33% respectively, closing at N0.60 and N0.26 per share, on market forces. On the flip side, University Press and Royal Exchange Assurancelost 9.73% and 8.33% respectively to close at N1.67 and N0.22, purely on 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 April inflation and Q1 GDP data, alongside the MPC meeting holding on May 20/21. 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