Market Update for June 20
The prevailing lull on the Nigerian Stock Exchange continued on Thursday as stocks closed lower continuing its losing streak, although marginal and around a major support level in the midst of positive market breadth and mixed sentiments.
Thursday’s sustained cautious trading on the bourse was due to lack of immediate external and internal catalysts to drive the market and economy as delay in appointment of the economic management team have slowed down implementation of the 2019 budget, while many investors wait on the sidelines, watching to see the government’s plan to activate the economy.
We note that President Muhammadu Buhari inaugurated the National Economic Council on Thursday, challenging State Governments to each increase their internally generated revenue base to which groups in the nation’s manufacturing industry have likened to a call to embark on multiple taxes and the likes at the time powering the manufacturing plants of these companies, whether large, medium or small, remains a major cost impute, just as security and terrible infrastructure across the country.
Investdata expects the council, which is chaired by Vice President Yemi Osinbajo, to also prioritise the reconstitution of a board for the Securities & Exchange Commission (SEC), more than four years after the same government dissolved a properly constituted one. The continued none constitution of the SEC board for the commission does suggest that the government has scant regards for the economy of the country after all, given its prime importance to the wellbeing of the investing public and their investments. As a result of this disregard, there are too many ‘unknowns’ about the economy and the SEC for investors to take Nigeria’s equities market serious. We recall the speed at which the Presidency and the Nigerian Senate set aside their differences to confirm the President’s nominees to fill vacancies in the Central Bank of Nigeria’s Monetary Policy Committee (MPC), or the more recent express nomination and clearance of Godwin Emefiele as CBN Governor of a second five-year term before the expiration of the ninth National Assembly (READ).
The NSE All-Share index took off on the upside on Thursday morning on seemingly improved demand for shares of industrial and insurance stocks and was until midday before volatility set in. The index subsequently worked its way down, moving in waves, consolidating and forming coils, following which the market’s early morning strength faded away in the afternoon to touch intraday low of 29,695.62 basis points from a high of 29,897.18bps before finally retracing up to close the session at 29,765.31bps on low traded volume.
Thursday’s market technicals were negative and mixed with volume traded lower than the previous day’s, amidst of market breadth favouring the bull and slowdown in sell-offs as revealed by Investdata’s Daily Sentiment Report showing a ‘sell’ position of 65% and ‘buy’ volume was 35% of the total daily transaction volume index of 0.62.
The energy behind the day’s performance was still weak and flat, as Money Flow Index read 11.87points, from previous day’s 12.04bps, indicating funds are leaving the market and some stocks in the midst of prevailing low liquidity.
Index and Market Cap
At the end of the day’s trading, the benchmark NSEASI shed a marginal 7.41bps, closing at 29,765.31bps, after opening at 29.772.72bps representing 0.02% drop, just as market capitalization slipped N3.27bn lower, closing at N13.12tr, from its opening value of N13.12tr, which represented 0.02% depreciation in value.
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The day’s downturn resulted from profit-taking in Forte Oil, Zenith Bank, Stanbic IBTC, Cadbury, C/I Leasing and MTNN, that impacted negatively on the Year-to-Date loss position which rose to 5.30%. Market capitalisation gain also dropped to N1.28tr, or 13.25%, from the year’s opening level of N11.72tr.
Bullish Sector Indices
All the sectoral indices were largely bullish, except for the NSE Oil/Gas which closed lower by 1.05%, while the NSE insurance led the advancers after gaining 3.68%. It was followed by Industrial goods with 1.90%, next were banking and consumer goods with 0.63% and 0.44% respectively.
Market breadth was positive as advancers outnumbered decliners in the ratio of 25:14, just as market activities were down in volume and value traded by 77.69% and 94.25% respectively to 275.49m shares worth N3.91bn from the previous day 1.23bn units valued at N67.89bn. This volume was driven by financial services and industrial goods stocks like Sterling Bank, Lafarge Africa, Access Bank, Guaranty Trust Bank, and Zenith Bank.
Lafarge Africa and Linkage Assurance were the best-performing stocks for the day, topping the advancers’ table with 9.95% and 8.93% respectively to close at N10.50 and N0.61 per share, on market sentiment and forces respectively. On the flip side, C & I Leasing and Forte Oil lost 10% and 9.96% respectively to close at N31.20 and N5.67 per share on profit-taking.
The bearish trend and mixed performance may slow-down on a positive statement or move by the government on the economy and expected to reposition by bargain hunters at this current low stock prices in anticipation of March year-end earnings reports and second half interim dividend.
Investors may also take into consideration the expected economic reforms as the new cabinet are expected on board as CBN had started rolling out plans and guidelines on how to lend to the private sector to boost economic activities and investment in different industries.
Investors look to government’s policy direction as the market faced low liquidity problems in pre and post-inauguration 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.
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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