NGSE Index Loses 19% YoY, As Large Cap Stocks Hit New 52-Week Lows

Market Update for October 9
The free fall of equities on the Nigerian Stock Exchange (NSE) continued and even worsened at the midweek, as benchmark All Share index extended its seventh consecutive day of losses, breaking down its October 3, 2019, strong support level of 26,789.38 basis points. In the process, the exchange made new lower lows on persisted selloffs in high cap stocks, despite the oncoming earnings reporting season.
The market recorded a 52-week loss of 19.01%, confirming the bearish state of the general market, with more stocks, including heavyweights- Dangote Cement, Nigerian Breweries, Presco, Guinness and AXA Mansard Insurance, making new 52-week lows.
The manufacturing companies made new lows due to indecision among investors, arising from their unimpressive earnings reports before now.
The declining investor confidence has become even stronger, with the negative sentiments that now dominate trades in recent days in the absence of positive news and policy statement from the government or its agencies. Market players are seemingly concerned over the slow implementation of the 2019 budget, a situation that has affected the economy, making the 2020 budget. The proposed budget was submitted by President Muhammadu Buhari to a joint session of the National Assembly on Tuesday, October 8, 2019, less attractive (READ MORE). This is despite the fact that it is an expansionary budget, with the debt servicing component higher than the capital expenditure budgeted to finance infrastructure in 2020.
Invesdate notes that there is no provision for new projects in the proposed budget presented to the National Assembly, just as we align with the submission of the Senate Leader, during deliberations on the President’s presentation, that the capital component of the Bill is not enough to stimulate as much growth as the country needs at this time (READ MORE).
Trading on Wednesday opened slightly on the downside and maintained the trend till mid-morning to afternoon amidst continued selloffs in highly capitalized stocks and blue-chip companies. This dragged the index to an intraday low of 26,489.42bps, from its high of 26,817.30bps. However, at the last minutes of the session, the index retraced up marginally to close at 26,598.94bps on a very high traded volume that signaled that something is underway for discerning investors and traders.
Midweek’s market technicals were negative and mixed, with higher traded volume than the previous day in the midst of negative market breadth and mixed sentiments, as revealed by Investdata’s sentiment reports showing a sell position of 63% and a ‘buy’ volume of 37%. The transaction volume index for the day stood at 1.17, just as the Daily Timeframe- MACD remained bearish, while Money Flow Index remained weak while looking down.

Index and Market Cap
The composite NSEASI at the end of Wednesday’s transactions lost 210.98bps, closing at 26,598.94bps from its opening point of 26,809.92bps, representing a 0.79% decline, just as market capitalization fell by N102.71bn at N12.95tr, from its opening value of N13.05tr, which also presented 0.79% depreciation in value. The capitalization, therefore, fell below N13tr for the first time in many months.
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Midweek’s downturn was due to high selloffs in medium and high cap stocks like Dangote Cement, Nestle, Nigerian Breweries, Guinness Nigeria, Dangote Flour, FBNH, Zenith Bank, Presco, PZ, and UCap, among others. This impacted negatively on the NSE’s Year-to-Date loss, which increased to 15.37%, while YTD market capitalization gain reduced to N1.15tr, representing a 10.98% improvement over the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bearish at the end of the day, except for the NSE Banking and Oil/Gas Index that closed higher at 0.35% and 0.10% respectively, while the NSE Consumers Goods index led the decliners, after shedding 1.80%, followed by the NSE Industrial goods and Insurance indexes at 1.63% and 0.77% respectively,.
Market breadth was negative, as decliners outnumbered advancers in the ratio of 15:12; while market activities in volume and value rose significantly by 217.85% and 191.55% respectively to 591.04m shares worth N7.4bn; from previous day’s 185.95m units valued at N2.54bn. The day’s volume was driven by transactions in Custodian Investment, Access Bank, Lafarge Africa, Guaranty Trust Bank, and Guinness Nigeria.
The best-performing stocks for the day were Learn Africa and Chams, which chalked gaining 9.80% and 8.33% respectively to close at N1.12 and N0.26 each, on market forces. On the flip side, PZ Cussons and NCR lost 10% and 9.09% respectively, closing at N6.30 and N4.50 on selloffs.

Market Outlook
We expect the mixed performance to continue on selloffs, as bargain hunters take advantage of the pullback to position ahead of quarterly scorecards, especially now that the NSEASI had broken down the recent support level to test a new lower low of 26,489.42bps. However, let the interplay of market forces determine direction.
Discerning investors should latch onto this, meanwhile, as a way of averaging down and recouping their investment immediately a recovery stage sets in, helped by economic policies, when things start to change gradually. In the process, equity prices will be influenced positively, while investors watch for sectors like insurance, banking, Industrial Goods, services, as well as oil/gas that have become defensive in recent times and could go bullish in no distant time.
Furthermore, we note that all eyes are on the newly appointed economic advisory team to settle down quickly and begin churning out policies capable of turning things around.

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