Mixed Trading Still, As Investors May React To Emefiele’s Reappointment, Digest Q1 Data

Market Update for May 9
Trading activities on the Nigerian Stock Exchange (NSE) on Thursday remained very volatile and mixed, resulting in four consecutive sessions decline amidst continuing selloffs due to lack of direction, as well as the prevailing low liquidity in the equity segment of the financial market.
Late Thursday, news filtered in that President Muhammadu Buhari had sent a letter to the Senate nominating Godwin Emefiele as Governor of the Central Bank of Nigeria (CBN) for a second and final term of five years (READ MORE). Expectations are that this would elicit reactions from investors and consequently reflect in the mood of the equities’ market at Friday’s session, given investors’ fear of monetary policy change or distortion in the event of a new CBN Governor. This is now out of the list of concerns for investors, since the leadership style of the Governor is no longer new, meaning there is a clear direction concerning such matters.
Also on Thursday, the Federal Government pledged to partner the NSE in the privatization of some public enterprises and ensure it plays a role in the process of the further work on the Ease of Doing Business, among other aspects of economic growth and development (READ MORE). This will result in more companies coming to list and thereby offering investors more options.
Another exciting news for the market is the impending listing of MTN Nigeria’s shares on the floor of the NSE, a situation expected to further broaden the market and give investors more choices (READ MORE).
The prevailing low Price/Earnings Ratio of the market, despite the seemingly weak Q1 numbers, should give hope of a rebound every soon, following which discerning investors and traders should take advantage of the current low prices of especially blue-chip stocks as their prices had suffered a significant decline in this down market situation.
Meanwhile, the nation’s key economic indicators are still positive, considering the drop in inflation rate to 11.25%, the cut in Monetary Policy Rate (MPR) to 13.5%, while external reserves as at May 8, stood at $44.843bn. Also noteworthy is oil price selling above $70 per barrel, as at Thursday, just as the National Bureau of Statistics (NBS) is billed to publish the April consumer price index and Q1 GDP numbers soon. These will further show how well the Nigerian economy has performed and enable investors to react appropriately, given that the NSE is a renowned discounting machine.
Thursday’s trading opened marginally on the upside in the morning, but pulled back between the mid-morning and afternoon session, after banking and consumer goods stocks suffered losses that forced the NSE’s benchmark All-Share Index touch intraday lows of 28,881.83 basis points. This was after it broke out the 29,000 basis point mark to 29,015.77bps on a low traded volume, before finally closing the session lower at 28,896.25bps.
Market technicals for Thursday were negative, as volume traded was lower than previous day’s in the midst of breadth favouring the bears, and high selling pressure, as revealed by Investdata’s daily sentiment report. Selling position stood at 89% and buy volume, 11% of the total daily transaction volume index of 0.51.
The energy behind the day’s market performance was weak as shown by the Money Flow Index of 25.76 points, from previous day’s 32.33bps, indicating that more funds are leaving the market as selloff continue, ahead of 2019Q1 GDP and unfolding events in the politico-economic space.

Index and Market Cap
At the close of trading, the composite NSEASI shed 70.16bps, closing at 28,896.25bps, after opening at 28,966.41bps, representing a 0.24% decline, just as market capitalization slowed N26.37bn down, closing at N10.86tr from its opening value of N10.89tr, which also represented 0.24% value loss.
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The day’s downturn followed the decline in share prices of Nigerian Breweries, Zenith Bank and FBNH, UACN, Transcorp, Japaul Oil and Wema Bank, among others. This impacted negatively on the Year-to-Date loss, which grew to 8.06%, just as market capitalization decline heightened to N860.33bn, or 7.34%, from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indices were mixed as NSE Banking and Consumer Goods closed 0.55% and 0.12% respectively to the downside, while the NSE Industrial Goods and Oil/Gas remained flat, leaving only the NSE Insurance in the green at 1.06%. Market breadth was negative in the ratio of 7:19.
Market activities were down in volume and value by 33.57% and 36.74% respectively, after 215.2m shares worth N2.05bn changed hands, compared to previous day’s 324.08m units valued at N3.24bn. The day’s volume was driven by Access Bank, Zenith Bank, Sterling Bank, GTBank, and Lasco Assurance.
The best-performing stocks were Veritascapital Insurance and AXA Marsand Insurance, which gained 10% and 5.41% respectively, closing at N0.22 and N1.95 per share, on the back of market forces. On the flip side, Japaul Oil and Caverton lost 10% and 9.96% respectively, closing at N0.27and N2.44, owing to profit-taking.

Market Outlook
We expect this mixed performance to continue as market players react to CBN governor and digest the Q1 numbers in expectation of April inflation and Q1 GDP data, alongside the new cabinet list now that the 2019 budget has been passed. More importantly, we expect that the government’s disbursement and implementation style in 2019 and beyond will change for good so as to drive the economy.
Investors look to government’s policy direction as the market faces low liquidity problems in the ongoing Q1 earnings reporting 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

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