Bargain Hunting Continues On NGSE, As FG Delays Cabinet List

Market Update for July 11
Thursday’s was another session of free fall for the benchmark All-Share Index of the Nigerian Stock Exchange (NSE) as the bearish sentiment continued leasing to selloffs in the most capitalized stocks. Many equities were forced to new lower lows as the bear dominance increased beginning from the last week of May.
So far, the nation’s stock market has been ranked the third worse performing among 75 countries in the world today, as the nation’s economy continues to struggle. Reasons for this are not far fetched in the glaring absence of fiscal stimulus that would complement the recent efforts of the Central Bank of Nigeria (CBN), which continues to tweak its rules so as to enhance bank lending to the productive sectors of the economy (READ MORE). One other effort of the apex bank could lead to a rebirth of the nation’s once-thriving cotton, textile and garment sector to generate employment and consumption, key ingredients for economic growth and development (READ MORE). The leadership style of this government and its non-implementation of the 2019 budget that was passed into law since May, continues to send wrong signals to investors, feedback of which we are seeing in the stock market today. The government of President Muhammadu Buhari is yet to send its Ministerial list for the National Assembly as various interests continue to pile pressure. When he eventually does, the whole process of screening the ministers and settling down will take till September for real governance to begin, just like in his first term, leaving the economy rudderless meanwhile.
Nonetheless, the ongoing pullback has created opportunities for accumulation, but we advise investors and traders to be cautious. They should target fundamentally sound stocks with a history consistent dividend payout whose business model supports growth.
Meanwhile, trading on Thursday started sharply on the downside in the morning and continued till afternoon, before retracing up marginally in the last minutes to close the session at 28,712.90bps after breaking down the psychological line of 29,000 basis points. It touched intraday low of 28,637.58bps from a high of 29,281.36bps on a low traded volume.
Market technicals for the day were negative as traded volume was slightly lower than the previous day’s, amidst the negative breadth and selling pressure as revealed by Investdata’s Daily Sentiment Report. The session’s ‘sell’ position was 88% and ‘buy’ volume was just 12% of the total daily transaction volume index of 0.44.
The momentum behind the day’s performance remained seriously weak and down, as Money Flow Index read 11.09 points, lower than the previous day’s 17.08bps. This shows that funds left some stocks, as selloff in high cap stocks persists on the exchange with investors and traders remaining cautious about the economy and market direction.

Index and Market Cap
The NSEASIat the end of the session lost a significant 543.70bps, to close at 28,712.90bps after opening at 29.256.60bps, representing a 1.86% decline. Market capitalization shed N264.97bn to close at N13.99tr, from its opening value of N14.26tr, which also represented 1.86% depreciation in value.
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The day’s downturn was driven by selloffs and profit taking in MTN Nigeria, Airtel Africa, Dangote Cement, Nestle Nigeria, Zenith Bank, Stanbic IBTC, FBNH, UBA, Access Bank and Lafarge Africa. This heightened the negative position of the Year-to-Date loss, bringing it to 8.65%. YTD market capitalization gain stood at N2.27tr, or 19.93%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Banking and Oil/Gas that closed green at just 0.64% and 0.01% respectively, while the Insurance index led the decliners, losing 2.67%, followed by consumer and industrial goods by 2.08% and 1.74% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 18:10; market activities were down in volume and value traded by 0.18% and 14.61% respectively to 188.43m shares worth N3.17bn from the previous day’s 188.77m units valued at N3.72bn. Volume was driven by trades in financial services stocks like FBNH, Zenith Bank, Access Bank, UBA and Guaranty Trust Bank.
Sovereign Trust Insurance and Courtville Business Solution were the best-performing stocks for the day, topping the advancers’ table with gains of 4.76% and 4.53% respectively to close at N0.22 and N0.23 per share, on market forces. On the flip side, AXA Mansard and Airtel Africa lost 10% and 9.99% respectively, closing at N1.80 and N323.50, on profit taking and continued selloff.

Market Outlook
Being the last trading session for the week, we expect this trend to continue, as bargain hunters take advantage of the subsisting bearish trend and buy ahead of the half-year earnings reporting season and inflation data next week. Discerning investors should target value stocks considering the low valuation to position for dividend income.
They may also take into consideration the expected economic reforms as government announces its much-awaited new cabinet, just as Central Bank of Nigeria (CBN) had rollout it 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 second half of the year in the midst of expected Q2 numbers, especially banking stocks.

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