Cautious Trading Continues On NGSE, Amidst Uncertainty About Market Direction

Market Update for July 10
Trading activities on the Nigerian Stock Exchange at the midweek continued its volatility outlook as the composite All-Share index slipped to a negative position, wiping away gains recorded in the two previous trading sessions on a massive selloff in the shares of newly listed Airtel Africa Plc and other high cap stocks, thereby dragging the market down.
The lips services of government and its agencies to fixing the economy continues to weaken the entire system, resulting in low trading activities and volume in recent times.
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Meanwhile, the NSEASI opened Wednesday’s trading on the downside and stayed so throughout the session, but retraced up by afternoon, even as the upward move was not enough to prevent it from closing the day lower at 29,256.60 basis points. This was after the index had touched intraday low of 29,010.33 basis points, from a high of 29,318.02bps, on a low traded volume.
Midweek’s market technicals were negative as traded volume was lower than the previous day’s amidst the negative breadth and positive sentiment as revealed by Investdata’s Daily Sentiment Report. The session’s ‘buy’ volume was 80% and ‘sell’ position of 20% of the total daily transaction volume index of 0.44.
The energy behind the day’s performance remained seriously weak, despite the improvement in the Money Flow Index at 17.08 points, which was higher than the previous day’s 11.73bps. This shows that funds entered some stocks, despite the selloff that hit Airtel Africa a day after listing. Investors and traders remain cautious about the direction of the market.

Index and Market Cap
The benchmark index at end of the day’s trading shed 61.42bps, closing at 29,256.60bps after opening at 29.318.02bps, representing a 0.21% decline, just as market capitalization lost N29.93bn, closing at N14.26tr, from its opening value of N14.29tr, which also represented 0.21% value loss.
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The day’s downturn was as a result of selloffs and profit taking in medium and highly capitalised stocks like Airtel Africa, Dangote Cement, and Lafarge Africa, which had a negative impact on the Year-to-Date loss position, which rose to 6.92%. YTD market capitalization gain stood at N2.54tr, or 21.65%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indices were largely bearish, except for the NSE banking and consumer goods that closed 2.63% and 0.26% higher respectively, while the Oil/Gas index led the decliners, shedding 1.06%, followed by Industrial goods and insurance by 0.54% each.
Market breadth was negative as decliners outweighed advancers in the ratio of 17:15; market activities were mixed as volume traded was down by 35.93% at 188.77m shares from the previous day’s 294.62m units, while value increased by 15.51% to N3.72bn from N3.22bn on Tuesday. Volume was driven by trades in financial services, healthcare and conglomerates stocks like ZenithBank, Morison Industry, FBN Holdings, Guaranty Trust Bank and Transnational Corporation of Nigeria.
NPF Microfinance and Union Bank of Nigeria were the best-performing stocks for the day, as they topped the advancers’ table with gains of 9.71% and 9.49% respectively to close at N1.13 and N7.50 per share, on market forces. On the flip side, Forte Oil and Airtel Africa lost 10% and 9.99% respectively, closing at N20.70 and N359.40, on profit taking and selloff.

Market Outlook
The ongoing mixed performance may 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, as the CBN again made a fresh move to compel bank lending by further reducing the Standing Deposit Facility (SDF) to N2bn, with effect from Thursday, July 11, 2019 (READ MORE).

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