Indicators Remain Flat, Despite Onset Of Earnings Season, Amidst Weak Macroeconomic Indices

Market Update for October 16
Stocks dipped further on the Nigerian Stock Exchange (NSE) at midweek, maintaining the bearish path that had dominated the trend in recent times, despite the 2019Q3 scorecard released to the market by Guaranty Trust Bank with mixed numbers, as topline was down marginal, and profit level inched up (READ MORE). Also, Okomu Oil Palm announced an interim dividend of N2, kicking off the earnings reporting season as expected.
The continued decline in the stock market as a leading indicator, is a clear sign that all is not well with the economy, a situation that has been confirmed by the mixed macroeconomic indices ranging from the 1.94% Q2 GDP; purchasing managers’ index at 57.7 points, declining from 57.9 points; as well as the September inflation that inched 11.24% from 11.02%. Worse still, the nation’s unemployment rate has peaked at 36%, besides the low consumer and investor confidence, with government and its economic managers yet to carry out the much needed strategic economic reforms needed to stimulate national productivity and growth.
The global markets were mixed due to earnings reports being released and overseas trade, after China warned the US that it could take countermeasures, after the U.S House of Reps looked into the possibility of altering Hong Kong’s special trading status, due to human right issues linked to the ongoing protests.
Meanwhile, the NSE All-Share Index opened lower in the morning but rebounded at mid-morning to the afternoon in the aftermath of the GTBank’s Q3 numbers before pulling back on selloffs and profit-taking in MTNN, Stanbic IBTC, and Lafarge Africa, touching intraday low of 26,470.68 basis points, from its high of 26,574.38bps. The index, however, retraced up slightly to close the day lower, at 26,472.20bps on positive market breadth.
Market technicals for the session were negative and mixed with volume traded lower than the previous day in the midst of breadth favouring the bulls and high selling pressure, as revealed by Investdata’s sentiment reports showing a ‘sell’ volume of 99% and buy’ position of 1%. The transaction volume index for the day stood at 0.65. The impetus behind the day’s performance was weak, with the Money Flow Index reading 19.52 points, from the previous session’s 17.25bps. This is an indication that funds entered some stocks, despite the down market in the midst of the ongoing earnings season.

Index and Market Cap
At the end of midweek’s trading, the NSE All-Share Index lost 41.45bps, closing at 26,472.20bps from its opening point of 26,513.65bps, representing a 0.16% drop, just as market capitalization lost N20.18bn to close at N12.89tr, from an opening value of N12.91tr, which also presented 0.16% depreciation in value.
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Wednesday’s downturn was due to selloffs and profit booking in stocks like MTNN, Zenith Bank, Lafarge Africa, Ecobank Transnational Incorporated, Oando, Stanbic IBTC, and Wapic Insurance, among others. This impacted negatively on the NSE’s Year-to-Date loss, increasing it to 15.78%, while YTD market capitalization gain fell to N1.16tr, representing a 9.95% improvement over the year’s opening level of N11.72tr.

Bearish Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Consumer Goods and Banking, which closed higher by 0.22% and 0.07% respectively, while the NSE Industrial Goods led the decliners, after losing 1.01%; followed by the Oil/Gas and Insurance indexes that shed 0.29% and 0.21% respectively.
Market breadth turned positive for the day as advancers outnumbered decliners in the ratio of 13:11; whereas market activities in volume and value were mixed. Volume was down by 20.52% as investors traded 138.47m shares, compared to the previous day’s 174.41m units; while value rose by 65.07% to N3.6bn, from the previous day’s N2.32bn. Tuesday’s volume was driven by transactions in Access Bank, GSPEC Plc, Zenith Bank, Transcorp Plc, and FBN Holdings.
Law Union and Livestock Feeds were the best-performing stocks, as they topped the advancers table, after gaining 9.095% and 6.38% respectively to close at N0.48 and N0.50 each, on recapitalization moves and parent company holding influence. On the flip side, Wapic Insurance and Chams lost 8.57% and 8.33% respectively, closing at N0.32 and N0.22 on market forces

Market Outlook
We expect the mixed performance to slowdown on the influx of Q3 numbers into the market, especially with the NSE’s new lows offer traders and investors opportunities to position for short and medium-to-long-term views. Given that earnings and economic news can change trend at any time, keep your gaze on fundamentally sound and dividend-paying stocks for possible capital appreciation as Q3 numbers giving insight into companies’ position and future expectation.
Also, traders and investors need to change their trading strategies due to the review of the NSE’s pricing methodology, now that all class of equities need uniform 100,000 units to effect any price changes. This may be part of efforts to mitigate the persistent price decline that has seen many stocks trading at between their five and ten-year lows and even more, in recent times.
Discerning investors should latch onto this, meanwhile, as a way of averaging down and recouping their investment immediately a recovery stage sets in, helped by economic policies, when things start to change gradually. In the process, equity prices will be influenced positively, while investors watch for sectors like insurance, banking, Industrial Goods, services, as well as oil/gas that have become defensive in recent times and could go bullish in no distant time.
Furthermore, we note that all eyes are on the newly appointed economic advisory team to settle down quickly and begin churning out policies capable of turning things around.

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