Mixed Trading, Amidst Low Stock Valuation Attraction, Month-end Rebalancing

Market Update for May 30
The volatility on Nigerian Stock Exchange continued Thursday, slowing down previous day’s gains on profit taking ahead of the last trading day of the month, after the inauguration of the President Muhammadu Buhari for a second four-year term in office. Also on Thursday, the court ordered the reinstatement of Mounir Gwarzo, the suspended Director-General of the Securities and Exchange Commission (SEC), which investors expect will elicit some form of reactions from the market when it opens on Friday, just as the market is expecting the new federal cabinet and the government’s new reform initiatives to stimulate the economy and impact market performance positively.
There is also the effect of improvements notices in the money flow index, amidst persistent low appetite for risk in developed markets due to an escalation of the U.S -China trade dispute. There are other issues like the oscillating oil price that has been of serious concern to investors who are now looking to emerging markets, where they hope to take advantage of the persisting low stocks valuations.
Thursday’s trading started on the upside, before pulling back at the mid-morning to early afternoon on profit booking that was evident across all the sectors, before retracing up by late afternoon to close the day marginally down. This was after the NSE All-Share index had touched intraday low of 31,078.83 basis points, from its high of 31,420.68bps before finishing at 31,254.19 bps on mixed sentiments.
Market technicals for the day were negative and mixed as traded volume was higher than the previous day, in the midst of flat market breadth and mixed sentiment, as revealed by Investdata’s Daily Sentiment Report showing ‘buy’ volume of 51% and ‘sell’ position of 49% of the total daily transaction volume index of 1.27.
The momentum behind the day’s performance was up and strong, as Money Flow Index soared to 61.19points, from previous day’s 53.79bps, an indication that funds are still entering the market and some stocks, despite the pullback due traders cashing out the profit.

Index and Market Cap
At the end of Thursday’s trading, the NSE’s composite index shed a marginal 52.81bps to close at 31,254.19bps, after opening at 31,307bps, representing 0.17% decline, just as market capitalization dropped shed N23.26bn to close at N13.77tr, from its opening value of N13.79tr which also represented 0.17% value loss.
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Thursday’s downturn resulted from profit-taking in medium and high cap stocks like Dangote Cement, Guaranty Trust Bank, Zenith Bank, FBNH, Access Bank, ETI, Forte Oil, Unilever, Berger Paints, Dangote Flour and Dangote Sugar, among others. This impacted negatively on the Year-to-Date negative position, which inched to 0.56%, just as market capitalization gain stood at N2.05tr or 17.15%, from the year’s opening level of N11.72tr.

Bearish Sector Indices
All the sectoral indexes closed the session lower, led by NSE Banking with 1.93%, followed by Consumer Goods’ 0.53%, while Oil/ Gas lost 0.42%. The insurance and industrial goods indexes shed 0.14% and 0.04% respectively, with Market breadth staying flat as the number of advancers outweighed decliners in the ratio of 20:19.
Market activities were mixed as volume traded was up 9.44% to 376.8m, shares from the previous day 344.81m units, while value fell by 18.97% to N5.89bn from N7.27bn on Wednesday. The day’s volume was driven by healthcare and financial services stocks, like Union Diagnostic, UBA, Zenith Bank, Access Bank, and Law Union.
The best-performing stocks for the session were Livestock Feeds and Law Union, which topped the advancers’ table with 9.269% and 9.09% gains respectively, to close at N0.59 and N0.48 per share on market forces. On the flip side, Japaul Oil and PZ Cussons lost 8.25% and 4.71% respectively, closing at N3.65 and N8.10, on market forces.

Market Outlook
We expect mixed performance, being the last trading day of the month and recovery may 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
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467

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