Mixed Outlook On NGSE, Amidst Prevailing Low Liquidity, Month-end Window Dressing

Market Update for August 28
Stocks on the Nigerian Stock Exchange at the midweek struggled to recover ahead of month-end window dressing, as the nation’s economic situation and waning investor confidence continue to reflect by way of persistent profit-taking, just as the recent attempt at a rebound is weighing on buying interest.
Investors have their gaze fixed on the expected economic policies to be churched out by the new Federal Executive Council, implementation of the 2019 budget and the all-important Q2 GDP report by the National Bureau of Statistics (NBS) for direction, as the month of August comes gradually to an end.
The session’s mixed sentiment supported the benchmark NSE All-Share index as it closed marginally positive on the strength of increasing demand for shares of telecommunication giants- MTN Nigeria, as well as stocks in the industrial, insurance and oil/gas sectors. Despite the continued profit-taking in the banking and consumer goods stocks, the prevailing low traded volume and liquidity are signs of indecision among traders and investors who have, before now, adopted wait-and-see.
A mixed half-year earnings report was presented to the market by Stanbic IBTC Holdings Plc, showing a 15% drop in net profit, despite which the directors offered to pay N1.00 interim dividend per share. The boards of Nigerian Enamelware Plc and Greif Nigeria Plc presented their first and third quarter reports respectively, which were also unimpressive and in red, reflecting the state of the economy, while following the trend of reports released by other companies earlier.
Also, ETI informed the investing public that the International Finance Corporation (IFC) is divesting its 14.1% stake to Arise B.V (READ MORE), just as Forte Oil received a mandatory takeover offer from Ignite Investments and Commodities Limited to purchase 500,000 units at N66.25 per share. All these are expected to influence the market and share prices of these companies as trading opens Thursday morning.
Meanwhile, trading at midweek oscillated as the composite index opened on a slight upside and pulled back by the midday to afternoon, touching intraday low of 27,546.34 basis points, from a high of 27,626.37bps. It thereafter rebounded to close the day marginally above its opening figure at 27,607.02bps on a mixed sentiment.
Market technicals for the day were positive and weak, as volume traded was lower than the previous day’s, in the midst of flat market breadth and strong buying pressure, as revealed by Investdata’s Daily Sentiment Report, showing ‘buy’ volume at 76% and a ‘sell’ position of 24% on total daily transaction volume index of 0.61.
The momentum behind the day’s performance remained weak, despite moving up as Money Flow Index read 41.72 points, from the previous session’s 37.23bps, an indication that funds entered some stocks and the market as buying interest for dividend-paying stocks increased.

Index and Market Cap
At the end of Wednesday trading, the All-Share Index gained a marginal 4.25bps, closing at 27,607.02bps, having opened at 27,602.64bps, representing a 0.02% up, just as market capitalization was up by N2.05bn to N13.43tr from an opening value of N13.43tr, which represented 0.02% value gain.
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The day’s upturn resulted from bargain hunting in stocks like Dangote Cement, MTNN, Lafarge Africa, CCNN, Oando, Ecobank Transnational Incorporated, and Forte Oil, among others. These had a marginally positive impact on the NSE’s Year-to-Date loss, as it stayed at 12.16%, just as YTD market capitalization gain inched to N1.71tr or 15.04% from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Banking and Consumer goods index that closed lower by 1.34% and 0.105 respectively. The NSE Insurance index led the advancers, gaining 2.25%, followed by the Industrial Goods index’s 1.0% and 0.36% in the Oil/Gas index.
Market breadth was flat as decliners were equal in number to advancers in the ratio of 13:13; but market activities in volume and value traded dropped by 29.01% and 33.22% respectively at 130.37m shares worth N3.01bn, from the previous day’s 183.65m units valued at N4.50. The day’s volume was driven by trades in Transcorp Plc, MTNN, Zenith Bank, Nestle and Guaranty Trust Bank,
John Holt and Cornerstone Insurance were the best-performing stocks for the day after gaining 10% each to close at N0.55 and N0.22 per share on market forces. On the flip side, Honeywell Flour and PZ lost 7.41% and 5.60% respectively to close at N1.00and N5.90 on profit-taking and market forces.

Market Outlook
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 Investdata sees the likelihood of a slowdown in Nigeria’s expected Q2 GDP data. Also speculation ahead of month-end window dressing, 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
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