NGSE Market Update for August 23, 2018

Dangote Cement Plc, the biggest stock by market capitalization of the Nigerian Stock Exchange (NSE), on Thursday, pulled its weight, impacting the indicators positively to reverse the previous day’s down market after the Sallah holiday. This followed a seemingly improved buying sentiment, as highly capitalized stocks become most attractive at the prevailing market value for institutional investors.
The volatility pattern of the market continued to reflect cautious trading by players as the nation’s statistics support arguments about stagnation in the economy, especially with the low consumer confidence and dwindling purchasing power among Nigerians. Unfortunately, it is happening at a time governance has taken the back seat, with government and politicians concentrating their efforts at the moment on politics at the detriment of the economy, with implementation of the 2018 budget yet to reflect on the system. Meanwhile, the government is talking of presenting the 2019 budget to the National Assembly next month.
The NSE’s All-Share index opened Thursday on a sharp gap down in the morning session, which was sustained until afternoon, as high cap stocks that had suffered losses appreciated in price, before retracing up. It touched an intraday high of 35,206.16 basis points, from its low of 34,481.47bps to close the session higher at 35,206.16bps on its recent average traded volume.
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Market technicals on Thursday were weak and mixed, despite the positive sentiment in the midst of relatively low volume traded and negative market breadth. This was confirmed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 100% and ‘sell’ volume at 0%. Volume index was 0.88 of the day’s total transactions.
Momentum behind the day’s market performance was weak, as reflected in the money flow index at 15.91bps, despite inching up from previous day’s 15.74 points, indicating that funds entered few stocks in midst of the prevailing low liquidity in the market.

Index and Market Cap
The benchmark index at the end of the day’s trading gained 542.68bps at 35,206.16bps, after opening at 34,663.46bps, representing a 1.57% growth, to remain above the psychological line off 35,000bps. Market capitalisation rose by N198.12bn to close at N12.85tr, from an opening value of N12.62tr, representing a 1.57% value gain, which further reduced investors’ loss position.
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Thursday’s upturn was attributed to value gain in low medium and high cap stocks like Dangote Cement, Guaranty Trust Bank, Oando, Dangote Flour, United Capital, FBNH, and Honeywell that impacted positively on the NSE’s Year-to-Date return, which further contracted to 7.94%. Market capitalization decline within the period dropped to N726.95bn, or 5.37% below the year’s opening value.

Mixed Sector Performance
Sectorial performance for the day was largely bullish, except for the NSE Banking and Consumer goods that closed down by 0.38% and 0.46% respectively. Market breadth remained negative as decliners outpaced advancers in the ratio of 25:11 to halt the previous day bear market.
Market activities were mixed as volume was up by 0.10% to 220.71m shares from the previous day’s 220.5m units, while value was down by 20.59% to N2.53bn from Monday’s N3.19bn.
Transactions for the day were boosted by trading in financial service and conglomerates stocks that witnessed increased trading to top the activity chart, like: UBA, Zenith, FBNH, Transcorp and Skye Bank,
Wapic Insurance and Veritas Kapital were the best performing stocks as they topped the advancers’ table, after gaining 8.82% and 7.68%respectively, closing at N0.37 and N0.28 respectively, purely on market sentiments. On the flip side, Livestock Feeds and Redstar Express were the worst, losing 9.84% and 9.65% respectively to close at N0.55 and N5.15 respectively as a result on profit taking and market trend.

Market Outlook
We expect the market to oscillate as bargain hunters take advantage of the low-price regime, as political party primaries kicks off. The ongoing anxiety in Nigeria’s political environment by party leaders and politicians is heating up the system and scaring investors away. The market may also likely be impacted by the outcome of the expected Q2 GDP report any moment as the whole world watches Nigeria’s politicians ahead of the all-important 2019 general elections.
Meanwhile, investors continue to interpret the recent Q2 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released so far as a basis for determining the market and economy’s direction going forward. More disappointing reports will drive the market further down, or inspire a reversal if the numbers beat expectation.
Also important, is the outcome of the shadow elections by political parties taking place in the month of August. Investors should review their positions in line with investment goals, 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, especially during this season were Q2 interim dividend payment are expected in the market arena very soon.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamental.

Attention
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Ambrose Omordion
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