Expect Mixed Performance, Profit-Taking Still, As Investors Rebalance Month-end Portfolios

Market Update for August 29
Volatility continued on Nigeria’s equity market on Thursday, following which it closed negative, reversing previous mid-week’s marginal gains, on an increased losing momentum after four consecutive sessions of an attempted rebound failed. Also, the composite All-Share index was unable to break out its first resistance level of 27,800.17 basis points, owing to persistent, but expected profit-taking and selloffs.
The pullback on Nigerian Stock Exchange (NSE) was largely due to low market inflow as smart money continues seating on the sidelines, observing the nation’s mixed macroeconomic indices in hope for economic reform policies capable of stimulating productivity and consumption. However, global stocks, yields, and commodities were up on Thursday, feeding on the outcomes and statements coming out of the ongoing G7 meeting which is influencing global sentiments across financial markets, policymakers and economies.
The seeming opposing views of the Finance, Budget, and National Planning Minister, as well as a member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), tells you the mindset of our economic managers. It, nonetheless, also gives an insight into what we should expect from this newly constituted Federal Executive Council (FEC).
On Thursday, Guinness Nigeria and PZ Cussons Nigeria presented their 2019 full-year earnings reports during trading, as usual, with mixed performance, as they declared N1.52 and N0.15 dividends per share respectively. Also, Fidelity Bank seeming impressive presented audited half-year numbers which investors are expected to react to on Friday (READ MORE).
Meanwhile, the NSEASI opened for trading on a slight upside, before pulling back in the mid-morning to afternoon, touching intraday low of 27,423.36 basis points, from a high of 27,643.50bps, before closing the session lower at 27,425.57bps.
Thursday’s market technicals were negative and mixed, as volume traded was lower than the previous day’s, in the midst of positive market breadth and strong selling pressure, as revealed by Investdata’s Daily Sentiment Report, showing ‘sell’ volume at 99% and a ‘buy’ position of 1% on total daily transaction volume index of 0.55.
The impetus behind the day’s performance remained weak and flat as Money Flow Index read 41.88 points, from the previous session’s 41.72bps, an indication that funds exited some stocks and the market as selloffs continued.

Index and Market Cap
At the close of the day’s trading, the benchmark index shed 181.45bps, closing at 27,425.57bps, after opening at 27,607.02bps representing a 0.66% decline, similarly, market capitalization lost N88.27bn, closing at N13.34tr, from an opening value of N13.43tr, which represented 0.66% deprecation in value.

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The session’s downturn resulted from profit-taking in stocks like Dangote Cement, MTN Nigeria, Zenith Bank, Oando, UACN, and Flour Mills, among others. These were enough to negatively influence the NSE’s Year-to-Date loss, as it stayed at 12.74%, just as YTD market capitalization gain reduced to N1.63tr or 14.37% from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indices were largely bullish, except for the NSE Industrial and Consumer goods index that closed in red at 0.74% and 0.19% respectively. The NSE Insurance index led the advancers, gaining 1.83%, followed by the Oil/Gas index’s 0.10% and next was Banking with 0.09%.
Market breadth was positive as advancers outnumbered decliners in the ratio of 18:14; but market transactions in volume and value traded dropped by 10.29% and 45.1% respectively at 116.07m shares worth N1.65bn, from the previous day’s 130.37m units valued at N3.01bn. The day’s volume was driven by trades in Zenith Bank, Lafarge Africa, Access Bank, Niemeth and Guaranty Trust Bank.
Continental Reinsurance and Africa Prudential were the best-performing stocks, gaining 9.79% and 8.57% respectively to close at N1.57 and N3.80 per share on market forces and low price attraction. On the flip side, UACN and Flour Mills lost 9% and 5.59% respectively to close at N4.55 and N13.50 on profit-taking and market forces.

Market Outlook
Being the last trading day of the week/month, we expect the mixed performance to continue in the midst of profit-taking at a time of prevailing low liquidity, oscillating oil price, even as the general market composite index nears it major bottom in the coming weeks. Also, Investdata sees the likelihood of a slowdown in Nigeria’s expected Q2 GDP data. Market players speculation ahead of Q3 earnings reports in October, taking advantage of the seeming improvement in some other economic indices released recently, as well as corporate earnings showing the true position of Nigeria’s listed companies.
Meanwhile, long-term investors are reshuffling their portfolios in anticipation of interim earnings reports of dividend-paying companies.
Discerning investors should target value stocks considering the current low valuation as they position for dividend income and capital gains, especially as the market’s Price to Earnings ratio remains attractive at 5.45x, which is well below the 8.24x average of its peers and its 9.56x five-year average. The current situation has revealed the existence of value and the high upside potentials for a rally. But then, wait to confirm reversal before jumping into a new position.
Investors should also take into consideration the expected economic reforms as President Buhari has assigned portfolio to the ministers. Central Bank of Nigeria (CBN) had earlier rolled out 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 last quarter of the year ahead of Q3 financials in the midst of analyzing Q2 numbers and unfolding political events.

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CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467