Market Update for the week ended September 7 and Outlook for Sept 10-14
The Nigerian equity market last week extended its decline as selling pressure increased as investors continued their flight for safety, while reshuffling their portfolios after digesting the corporate earnings that revealed the actual state of listed companies. The prevailing market situation reveals the undervalued nature of many blue-chip stocks that can offer attractive potentials for a rebound to what investors see as their fair value. This is one of the strategies often favoured by long-term investors, while positioning.
With this approach in mind and considering the political risk associated with the 2019 general poll which is less than 160 days from when Nigerians must decide those to lead them over the next four years.
As a result, investors should wait to identify potential support levels before jumping into any position, given that the market has entered another danger zone with stocks trading significantly near their 52-week low.
The dwindling economic activities and slowdown in economic growth was confirmed by the recent merchandise trade report released by the National Bureau of Statistics (NBS). Total trade, which is the value of exports and imports for the period was up by 14.6% to N6.6tr year-on-year, while declining quarter-on-quarter by 8.9%, due to lower import numbers. The trade report for Q2 2018 was unimpressive as export reduced by 49%, due mainly to a sharp drop in non-oil exports, just as imports suffered a 16.3% contraction, particularly reflecting lower imports of petroleum products. Surprisingly, this differed from the initial NBS report that showed petroleum products import rose 54.6% to about 166m liters.
Global markets during the week, also suffered setback on a bearish sentiment as a result of lingering trade and currency war that had made investors adopt wait-and-see attitude for the outcomes of ongoing negotiations. Such investors have also fixed their gaze on pronouncements by U.S President Donald Trump, since these have become a major factor influencing behaviour.
Back to the Nigerian bourse, general sentiments last week were negative, arising from selloffs for most parts of the period, as revealed by the ‘sell’ volume of 71% and ‘Buy’ position at 29%, while volume index of total transaction stood at 0.54. Reasons for this are not far-fetched, given that majority of investors and traders continue to ignore company fundamentals, preferring instead to ensure the safety of their capital. Bargain hunters are expected to cash in on these low prices in the coming weeks.
The momentum behind the week’s performance was weak despite the slight improvement as reflected in the money flow index at 31.08 points from previous week’s 30.09points. This is an indication that funds entered few stocks during the week, despite the liquidity challenges caused by foreign investors who continues to sell down ahead of the coming elections.
During the period under review also, the share price of Fidson Healthcare and University Press were adjusted for dividend recommended by their directors, while Ellah Lake Plc presented its belated earnings report for the full-year ended July 2017, alongside the 2018 ended July.

Equity Indicators Last Week
During the week, benchmark index nosedived further to consolidate an eight-month downturn with the market breaking down the psychological line of 34,000 mark to test the 33,667.34 basis points from the week high of 34,966.72 point. By end of the week, the NSE All0Share Index shed 810.34 basis points, closing at 34,034.91bps from an opening figure of 34,848.45bps, which represented a 2.33% decline on a low traded volume, compared to previous week. As market capitalisation was down by 2.33%, closing at N12.43tr, from the previous N12.64tr, due to the increased rate of selloffs in high cap stocks, as traders and investors continue to avoid losses by playing cautiously.
The week’s top advancers table were dominated by low cap equities, especially insurers at a time the winds of possible mergers and acquisitions (M&As) continues blowing arising from recent pronouncements by the sector’s primary regulator- the National Insurance Commission (NAICOM), thereby attracting short-term traders.
Meanwhile, the NSEASI’s year to date negative returns worsened further to 11%, just as market capitalisation yielded negative returns of N1.56tr, or 8.95% below the year’s opening value.

Bearish Market Breadth
Market breadth remained negative as decliners outnumbered advancers in the ratio of 39:33 amidst intensified selloffs and profit taking, with the general election drawing even closer. We cannot rule out the impact of the recent economic slowdown, with the attention of governments at all levels focused on the politics of 2019 at the detriment of the economy.
The NSE recorded four trading sessions of down markets for the week. The index opened for the week on a negative note, but reversed on the second day, before turning negative again at the midweek, sustaining this until Friday, resulting in 2.33% loss for the week, which was worse than that of previous week.
All sectoral indexes for the period closed red, except for the NSE AseM index that remained flat.
Market activities for the period were down in volume and value by 41.83% and 43.20% respectively to 892.73m shares worth N13.08bn, from previous week’s 1.53bn units valued at N23.03bn.
Consolidated Hallmark Insurance and Continental Reinsurance were the week’s best performing stocks, chalking 26.67% and 16.79% gains respectively to close at N0.38 and N1.60 each, due to market forces. The worst performing stocks were Law Union Insurance and Standard Alliance Insurance with 26% and 23.68% respectively to close at N0.54 and N0.29 each on profit taking and market forces.

Market Outlook
We expect a mixed performance for the market in the new week, as investors continue to trade cautiously in the short-term amidst continued selloff. However, we believe investors can take advantage of the current low prices of stocks with strong fundamentals in order to reap medium-to-long term benefits. Stage by stage buying is advised as inflation figure for August is expected in the market this week.
There could be repositioning on the strength of earnings in the midst of unfolding events in the political environment. Investors should review their positions in line with their investment goals and take action as events unfolds in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value, ahead of end of quarter which will ushered in another earnings season, ahead of Q3 interim dividend paying equities in October/ November due to the auditing process of their financials for Q3.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
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