NGSE Indexes Make New 3-year Low, Break Minor, Major Support levels

Market Update for August 7
Trading on the Nigerian Stock Exchange (NSE) at midweek maintained the now usual volatile and negative trend with the market lacking the needed stimulus to trigger positive reactions to the prevailing low valuations, notwithstanding the generally weak and disappointing Q2 earnings. Investors have so far priced these emergent numbers into stock valuation, making them look good relatively, considering their low prices.
The bearish sentiments which could end today, tomorrow or maybe in a month’s time has kept traders cautious, with prevailing indecision among investors that continues to reflect on the dwindling volume, value, and the number of trades on daily basis.
This increasing nervousness and volatility in the stock market have forced investors to seek alternative investments outlets for adequate returns with funds flows in search of a better window for profit and safety of capital, no matter how little such returns maybe, considering the yield, interest and inflation rates. For now, fixed income instruments and market are the close alternatives for investors, as they await a rebound in the equity segment of the market, especially now that FMDQ has become a full-fledged securities exchange (READ MORE).
Meanwhile, the composite NSE All-Share Index started the day’s trading on a gap down in the morning, extending the bearish sentiments that lasted all day, despite the seeming fluctuation during the afternoon session, after the index touched intraday low of 27.404.26bps from high of 27,534.56 basis points. It thereafter retraced up slightly, but still finished the day lower at 27,412.13bps on low traded volume, as key performance indices made new three-year low, breaking minor and major support levels.
Market technicals on Wednesday were negative as traded volume, value and number of deals dropped lower than previous day’s in the midst of negative breadth and high selling pressure as revealed by Investdata’s Daily Sentiment Report, with ‘sell’ position at 94% and buy volume is 6% of total daily transaction volume index of 0.64
The impetus behind the day’s performance remained weak, despite crawling up, as Money Flow Index read 21.70 points, higher than previous day’s 21.31bps, indicating that funds entered few stocks despite the high sell pressure among the blue-chip stocks.

Index and Market Cap
At the end of midweek’s trading, the NSEASI shed 115.27bps, closing at 27,413.13bps, after opening at 27,527.40bps, representing a 0.42% decline, just as market capitalization lost N56.17bn to close at N13.36tr, from N13.41tr, which also represented 0.42% value loss.
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Wednesday’s downturn resulted from selloffs in stocks like Dangote Cement, Zenith Bank, FBN Holdings, UBN, Flour Mills, Wema Bank, Japaul Oil, as well as May & Baker. This impacted negatively on the NSE’s Year-to-Date loss, increasing it to 12.78%, just as YTD market capitalization gain reduced to N1.23tr or 14.02% from the year’s opening level of N11.72tr.

Bearish Sector Indices
All sectoral performance indexes were largely bearish, except for the NSE Oil/Gas that closed marginally up by 0.19%, while the Insurance index led the decliners’ after shedding 1.92%, followed by Industrial goods index with 0.79%, as just like banking and consumer goods, were next, losing 0.44% and 0.04%respectively.
Market breadth was negative as decliners outweighed advancers in the ratio of 17:11; market activities were down in traded volume and value by 24.46% and 47.72% respectively to 128.95m shares worth N1.81bn, as against the previous 170.72m units valued at N2.26bn. Volume for the day was driven by trades in financial services and conglomerates stocks such as FBNH, Transcorp, FCMB, Access Bank and Zenith Bank.
AIICO Insurance and Conoil were the best-performing stocks that topped the advancers chart after gaining 9.38% and 6.38% respectively, closing at N0.70 and N17.65per share, on impressive Q2 numbers and N2.00 dividend payout (READ MORE). On the flip side, Redstar Express and Continental Reinsurance lost 9.85% and 9.68% respectively to close at N4.76 and N1.40 on market forces and selloffs.

Market Outlook
We expect the mixed performance to continue as traders and investors analyse the earnings reports released and reshuffle their portfolios in expectation of interim dividend-paying earnings reports. Also, we see bargain hunters taking advantage of new year-low stocks, as economic indices seemingly look positive. Discerning investors should target value stocks considering the current low valuation to position for dividend income and capital gain, especially as the market’s Price to Earnings ratio is 6.12x, which is well below the 9.85x average of its peers and a five-year average of 11.x. This revealed value and high upside potentials for a rally. But wait to confirm reversal before jumping into a new position.
They may also take into consideration the expected economic reforms as the government is set to assign portfolio to the screened minsters, just as Central Bank of Nigeria (CBN) had earlier rollout it plans to boost productivity and investment by instructing the banks to lend more to the private sector. This is aimed at reducing banks’ participation in government securities and lending more to the private sector to drive economic growth.
There is also the likely impact of portfolio repositioning for the last quarter of the year ahead of Q3 financials in the midst of analyzing Q2 numbers and unfolding political events.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467