NGSE Indicators Flounder Further, As Stocks Await Fiscal Stimulus For Rebound

Market Update for August 8
Stocks closed lower again at the end of Thursday’s trading on the Nigerian Stocks Exchange (NSE), despite the seeming marginal rebound that was driven by slight gains recorded by MTNN, CCNN, Dangote Sugar, AXA Mansard Insurance, Dangote Flour Mills and FCMB that saved the composite index from further decline.
The continued bearish-run was worsened as 14 market indices and 13 stocks made new 52-week lows, revealing the weak nation’s economic fundamentals, considering the influence of the oscillating crude oil price in the international market. Nigeria’s 2019 budget is already under threat with crude oil, the nation’s main revenue earner trading below $60, at a time of ballooning sovereign debt, while the trade dispute between the U.S and China, the world’s biggest economies continues to escalate. The situation is further worsened by the absence of a clear economic policy direction from a government that is seemingly in no hurry to constitute a cabinet, weeks after the Minister-designates were approved by the Senate, eight months into the fiscal year 2019.
Meanwhile, the near-absence of governance, even as the already existing policies continue to impact negatively on the economy, calling for an urgent review of some policies putting the economy in bad shape, as already indicated by the half-year corporate earnings and mixed macroeconomic indices that are now available to the investing public.
Thursday’s session was a very volatile and mixed as usual, as the NSE All-Share index opened slightly on the upside before slipping between then and early afternoon, touching intraday lows of 27,308.64 basis points from its high of 27,450.92bps. It, therefore, consolidated the downtrend before inching up, closing at 27,424.92bps on improved transaction volume.
Market technicals for the day were positive and mixed as traded volume, value and number of deals were higher than the previous day’s in the midst of negative breadth and high buying pressure revealed by Investdata’s Daily Sentiment Report, with ‘buy’ position at 82% and sell volume is 18% of total daily transaction volume index of 1.39
The momentum behind the day’s performance remained weak and flat as Money Flow Index read 21.69 points, slightly down from Wednesday’s 21.70bps, indicating that funds left some stocks despite the positive sentiment among high cap stocks.

Index and Market Cap
The benchmark index NSEASI at the close of trading gained a marginal 12.79bps to close at 27,424.92bps, after opening at 27,413.13bps, representing a 0.05% growth, just as market capitalization notched N6.23bn, closing at N13.36tr, from N13.36tr, which also represented 0.05% value gain.
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The day’s upturn resulted from buying an interest in some stocks which slightly impacted the NSE’s Year-to-Date loss, reducing it to 12.72%, 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 red, except for the NSE Industrial that closed 0.34% up, while the banking index led the decliners’ after losing 2.89%, followed by Oil/Gas index with 0.67%, as just as Insurance and consumer goods followed, shedding 0.39% and 0.31%respectively.
Market breadth remained negative as decliners outweighed advancers in the ratio of 23:9; market activities were up with traded volume and value rising by 116.84% and 127.03% respectively to 279.63m shares worth N2.68bn, from the previous day’s 128.95m units valued at N1.81bn. The day’s volume was driven by trades in financial services and construction/estate stocks such as FBNH, Zenith Bank, Access Bank, GTBank and UACN Property.
AXA Mansard Insurance and Jaiz Bank were the best-performing stocks after gaining 9.09% and 5.26% respectively, closing at N1.80 and N0.40 per share, on the back of reactions to the insurance industry recapitalization and impressive earnings. On the flip side, Guinness and Africa Prudential lost 10% each to close at N41.40 and N3.42 on market forces and selloffs.

Market Outlook
We expect the mixed performance to continue as traders and investors analyze 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 5.45x, which is well below the 8.24x average of its peers and a five-year average of 9.56.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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CRO|Investdata Consulting Ltd
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