Equities

NGSE Index Drops Lower, Awaits New Confidence Booster, Economic Triggers

Market Update for June 13
The market decline narrative continued on the Nigerian Stock Exchange (NSE) Thursday after yet another volatile session, following which it closed lower. This resulted from negative sentiments for high cap stocks like Dangote Cement, Zenith Bank, UBA, Flour Mills and Dangote Sugar that dragged the market further down.
It may be difficult to not to link this low confidence with the possible wait-and-see posture by the investing public for the Federal Government’s much-needed economic reforms policies. This has no doubt, again reflected on the sustained selloffs and low transaction volume during this session that followed mid-week’s celebration of Nigeria’s new democracy day to commemorate the election of Chief Moshood Abiola on that day 26 years ago.
Addressing the nation on Wednesday morning, President Muhammadu Buhari expressed his desire to grow the nation’s GDP by 2.7% and in ten years pull 100m Nigerians out of poverty. The desire, although a laudable economic vision, there are however those who argue that Nigeria’s economy has a capacity for double-digit growth (READ MORE), which will there rescue much more people from the grip of poverty.
Even then, we wait to see what steps will be taken to achieve the President’s very conservative target such as putting in place the right policies and personnel to drive them. The president’s cabinet nominees in this second four-year term will be the first signal that will show Nigerians whether Mr. President’s statements were just mere talks or a commitment to move the economy forward.
Meanwhile, the Central Bank of Nigeria (CBN), also on Thursday restated its plan to stimulate economic activities by lending more to the private sector at 9% and has extended it to include the nation’s fledgling creative industry. At the end of a meeting of the Bankers Committee, the nation’s banking industry also spoke of plans to boost consumer and mortgage credits, with the proposed linking of the Retirement Saving Accounts to encourage savings, while boosting participation in the contributory pension scheme of the National Pension Commission PenCom. These are expected to drive consumption and productivity.
Thursday’s trading opened slightly on the upside in the morning before pulling back between midmorning and afternoon as selling pressure hit the high cap stocks. The session, however, closed lower at 30,029.15 basis points, after touching intraday low of 30,022.92bps, from its high of 30,159.05bps which was above the opening figure of 30,099.83bps.
Market technicals for the day were negative and mixed, even as traded volume was higher than the previous day’s in the midst of a negative market breadth and strong negative sentiments, as revealed by Investdata’s Daily Sentiment Report showing a ‘sell’ position of 95% and ‘buy’ volume stood at 5% of the total daily transaction volume index of 0.84.
The momentum behind the day’s performance was relatively strong but down, reflecting the continued selloff, with Money Flow Index at 54.89points, from previous day’s 60.40bps, indicating that funds are leaving the market.

Index and Market Cap
Trading on Thursday was lower, as the composite NSE All-Share index shed 70.68bps, closing at 30,029.15bps, after opening at 30,099.83bps, representing a 0.23% decline. Similarly, market capitalization lost N31.13bn to close at N13.22tr, from its opening value of N13.26tr which also represented a 0.23% value loss.
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The downturn was due to losses suffered by highly capitalized stocks which impacted negatively on the Year-to-Date negative position, raising it to 4.46%, just as market capitalization gain dropped to N1.41tr, or 14.18%, from the year’s opening level of N11.72tr.

Bullish Sector Indices
All the sectoral indexes closed higher except for the NSE Industrial Goods which closed 0.55% lower, while the NSE Oil/Gas led the advancers after gaining 0.22%, followed by banking with 0.09%, while the Insurance and Consumer Goods sectors followed with 0.07% and 0.02% respectively.
Market breadth was negative as decliners outnumbered advancers in the ratio of 15:10, just as market activities were up in volume and value traded by 3.93% and 70.29% respectively to 242.62m share worth N5.96bn from the previous day’s 233.45m shares valued at N3.5bn. The day’s volume was driven by financial services and ICT stocks like Guaranty Trust Bank, Zenith Bank, UBA, ETI, and MTNN.
The best-performing stocks for the day were GSK and May&Baker that topped the advancers’ table with 9.15% and 6.33% respectively to close at N8.35 and N2.35 per share respectively on low price attraction and market forces respectively. On the other hand, C&I Leasing and NPF Microfinance lost 9.87% and 9.72% respectively, closing at N6.30 and N1.30, on correction and profit-taking.

Market Outlook
Being the last trading day of the week, expect mixed performance and downtrend to continue until bargain hunters hit the market again, as discerning investors take advantage of low valuation to rebalance their portfolio ahead of March year-end numbers and second half interim dividend stocks.
They may also take into consideration the expected economic reforms as the new cabinet are set to start running and the plans of 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

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