Market Update for March 20
Stocks closed lower again at midweek on the Nigerian Stock Exchange (NSE), reversing previous day’s seeming buying interest on low risk appetite in the absence of positive economic news and direction from the government needed to define its focus under the new dispensation. There is also the dwindling confidence that worsened since after the nation’s general elections, following which the benchmark NSE All-Share index turned red in the midst of earnings season, even as audited financial released so far have been largely uninspiring, a signpost of the realities of Nigeria’s economic wellbeing.
Expect factors like the recent rise in oil price which have reflected on the nation’s external reserves, as the price of Brent crude oil continues to climb, reaching $68.35 per barrel on Wednesday, rising 27% year to date, boosted by production cuts from the Organisation of Petroleum Exporting Countries (OPEC) and United States (U.S.) sanctions against Iran and Venezuela. The Nigerian National Petroleum Corporation (NNPC) has also assured that it will achieve the 2.3m barrel per day (mb/d) production volume-target for the 2019 budget.
There is also likely inflow from developed economies into emerging market as the yield environment in those countries nosedive. This is especially the true of the U.S, where the Fed has gone from mechanically raising rates as recently as December to sitting on their hands, following which at the end of their Wednesday meeting there was a promise of no further rate hikes this year after moving the rate from 2.25% to 2.50%. This will attract more funds to the money and fixed income instrument at the detriment of the economy, due to high interest rate. Nigeria’s benchmark Monetary Policy Rate has remained at 14% for years, thereby militating against small businesses and even big corporates due to high cost of funds.
The NSE index opened Wednesday trading on the downside in the morning session, a situation which lasted all day, moving front and back after touching intraday low of 31,015.27 basis points where it resisted further decline, from its highs of 31,104.90bps. It then retraced up, to finish the day lower at 31,040.84bps.
Market technicals at the midweek were negative with volume traded lower than previous day’s in the midst of negative breadth and high selling pressure, as revealed by Investdata’s Daily Sentiment Report, showing sell volume at 71% and buy position of 29% on total daily transaction volume index at 0.65.
The momentum behind the day’s market performance was weak but slightly up, despite the down market as shown by money flow index at 23.55 points, up from previous day’s 22.28bps, indicating a slowdown in the rate at which funds are exiting the market. This was as investors’ thirst for banking stocks increased due to earnings expectation and dividend possibility from second-tier banks.
Index and Market Cap
The benchmark index NSEASI at the end of Wednesday trading shed 41.48bps to close at 31.040.84bps, from an opening figure of 31,082.32bps representing 0.13% decline; while market capitalization lost N15.46bn, closing at N11.58tr from its opening value of N11.59tr, also representing a 0.13% value loss.
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Midweek’s downturn was due to selloffs in consumer goods stocks like Nestle, Nigerian Breweries, Unilever, Cadbury and PZ, as well as banking stocks: Stanbic IBTC, Econank Transnational Incorporated, FBNH and GTBank. This impacted negatively on Year-to-Date loss, which rose to 1.24%, while market capitalization loss increased to N85.27bn from the year’s opening level of N11.72tr, representing a 1.24% decline in value
Bearish Sector Indices
Sectoral performance indexes were largely bearish, except for the NSE Banking that closed higher on bargain hunting in FCMB, UBA, Zenith Bank, Fidelity Bank and Access Bank, while others were down due to selloffs and profit booking even as market breadth was turned negative with decliners outnumbering advancers in the ratio of 23:14.
Market activities were down in volume and value by 25.84% and 33.48% respectively to 223.66m shares worth N2.16bn, compared to the previous day’s 286.9m units valued at N3.09bn. Volume was driven by financial servicesstocks like: Access Bank, Zenith Bank, Fidelity Bank, UBA and FCMB.
Niger Insurance and Access Bank, were the best performing stocks for the day, gaining 9.52% and 9.24% respectively to close at N0.23 and N6.50 per share on market forces as well as the expected impact of the latter’s fusion with Diamond Bank. On the flipside, Cutix and Beta Glass lost 9.76%% and 8.92% respectively, closing at N1.85 and N71.95 each, impact of profit taking.
Market Outlook
As the month of March draws gradually to a close, more 2018 full year earnings reports are expected, just as quarter-end portfolio repositioning ahead of next week’s Monetary Policy Committee (MPC) meeting now that political spending and implementation of 2018 budget have not pushed up inflation as anticipated. There may be a slowdown in selloffs as investors wait to see the outcome of both meetings, as investors look forward to positive economic statement and policy to give direction. Volatility may however continue, as market players adopt the wait-and-see attitude in the faceof repositioning for the ongoing 2019 dividend declaration season and relative post-general elections peace to shape market performance in the interim. We advise cautious trading and investing while positioning in fundamentally sound equities.
Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on earnings reports, but investors should review their positions in line with their 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,
We advise also that investors should allow numbers 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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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
