Market Update for May 27
It was an interesting session on the Nigerian Stock Exchange (NSE) on Monday, as its benchmark All-Share index started this last trading week of the month of May closing lower while consolidating previous day’s negative outing. Profit taking, this time was concentrated in the trillion Naira cap stocks which had propelled the up market last week.
This correction reveals that any rally without strong fundamentals will not last, hence the need for investors to ascertain factors or reasons behind any movement before jumping in or out of a position.
The ongoing pullback in MTN Nigeria after breathing life to the market was due to the superficial rally, such that only the telecommunication giant as well as building materials maker and biggest stock on the NSE, Dangote Cement, took the market to new highs, even while most other stocks closed in the opposite direction. So serious was the allegations of price manipulation, following the lack of supply to enable expectant investors partake of the bazaar until recently, that Nigeria’s Economic and Financial Crimes Commission (EFCC) is now prying into the share transactions and free-float, despite the clean bill of health given by the regulators- Securities & Exchange Commission (SEC) and the NSE. On Saturday, MTN Nigeria, itself had confirmed that EFCC is currently investigating the listing process, a situation that may have further dampened investor confidence in a market that is struggling to revive retail interest after a prolonged downturn READ MORE.
Monday’s market low volume traded and the negative sentiment was despite the eventual signing of Nigeria’s N8.92tr 2019 budget by President Muhammadu Buhari into law barely 48 hours to the end of his first term in office. Investors continue to maintain their wait and see attitude, as they may be more interested now in the ministerial list, policies that would stimulate economic growth and development and whether there would be a change in the government’s funds disbursement and implementation styles as to make them have more impact on Nigerians. Aware of its low revenue profile that has resulted in the budget deficit for decades now, the Federal Government, last Friday, launched a Project Light House, as a continuation of its Economic Recovery and Growth Plan (ERGP) which lays more emphasis on data and information gathering by stakeholder government agencies for the purpose of revving its revenue profile (READ MORE).
Investdata believes that the 2019 budget should oil the wheel of productivity, given that government remains the biggest spender in any economy, to drive infrastructure and human capital development that support economic growth.
Meanwhile, trading on Monday opened sharply lower in the morning, in what may be the herd mentality as investors in the biggest stocks rushed for the exit door, before it oscillated in the mid-morning to afternoon, and then pulled back, closing the session lower. This was after touching intraday low of 30,188.62 basis points, from its high of 30,885.33bps on a low traded volume.
Monday’s market technicals were negative, with lower volume traded than the previous day, but market breadth remained negative while selling pressure was strong as revealed by Investdata’s daily sentiment report showing sell volume of 99%, leaving buy position at a mere 1% of total daily transaction volume index of 0.51.
The momentum behind the day’s performance was up but still weak, as shown by the Money Flow Index of 44.87points, from previous day’s 41.83bps, indicating that funds are entering some stocks in the midst profit taking in high cap stocks.

Index and Market Cap
At the time of closing, the composite NSEASI was down by a huge 686.58bps or 2.21% to 30,194.71bps, after opening at 30,881.29bps, just as market capitalization lost N302.41bn down, closing at N13.3tr, from its opening value of N13.6tr, which also represented 2.21% value loss.
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The day’s downturn was due to selloffs in high cap stocks like MTN Nigeria, Dangote Cement, Flour Mills, Oando, UBA, UACN, and Transcorp, among others. This heightened the Year-to-Date negative position to 3.93%, just as market capitalization gain fell to N1.82tr, or 14.07%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
All the sectoral indexes were largely bullish, except for the NSE Industrial goods and Oil/Gas that closed lower by 2.09% and 0.39% respectively, while the NSE Banking, Consumer Goods and Insurance led the advancers, by gaining 1.02%, 0.73% and 0.39% each. Market breadth remained negative as the number of decliners outweighed advancers in the ratio of 19:14.
Market activities were down in volume and value traded by 49.60% and 66.54%, respectively to 148.21m shares worth N2.22tr, as against the previous session’s 204.06m units valued at N6.63bn.
Volume was driven by ICT and financial services stocks, like Fidelity Bank, Access Bank UBA, Zenith Bank and MTNN.
Neimeth Pharmaceuticals and Ecobank Transnational Incorporated were the best-performing stocks, after topping the advancers’ table with 9.80% and 9.45% gains respectively, closing at N0.51 and N11.00 per share on market forces and low price attraction. On the flip side, RT Briscoe and MTN Nigeria lost 9.38% and 7.14% respectively, closing at N0.29 and N130.00, on market forces and profit taking.

Market Outlook
We expect mixed performance and profit-taking to continue, as investors take advantage of cheaper valuation to rebalance their portfolio ahead of March year-end numbers. They may also take into consideration, plans by the Central Bank of Nigeria (CBN) to reduce banks’ participation in government securities, while boosting private sector lending to drive economic activities and investment.
Investors look to government’s policy direction as the market faced low liquidity problems in pre and post-inauguration season, vis-à-vis market and economic fundamentals.
The drop in prices of major blue chips in recent times has created entry opportunities, following which we expect speculative trading to shape the market direction going forward.
The ongoing volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on political space and ongoing quarterly earnings position and post-election market dynamics. Investors should review their positions in line with their investment goals, the 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 investors to allow numbers to 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

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