NGSE Indicators React To Presentation Of Lower 2019 Budget, Slump After Initial Rise

Market Update for December 19
Midweek’s trading on the Nigerian Stock Exchange closed lower on negative sentiments and lower traded volume, joining the global markets bearish outing for the day as another hike in U.S rate further depressed investor confidence and worsened their fears. This is happening in the midst of declining 10-year treasury yields; high corporate borrowing and spending that will impact negatively on the economy and corporate earnings.
Emerging markets’ broadest index, the MSCI suffered a decline due to the U.S Feds announcement of the rate hike, which is expected to sustain volatility in global stock markets that will at the same time create opportunities to target blue chip stocks at a greater discount before the expected rebound in the nearest future.
Trading on the NSE started out on the upside in the morning to mid-morning, but after presentation of the N8.83tr 2019 budget, which is lower than N9.12tr of 2018, by President Muhammadu Buhari to the National Assembly for their consideration, the index pulled back. The budget cut may simply result in higher unemployment rate and increased poverty in the coming year, because even when it was higher and the government proposed to spend more, the living standard of Nigerians only worsened, while the economy continue to foot-drag.
Already, the for 2018Q3 employment data released by the National Bureau of Statistics (NBS), on Wednesday, shows that Nigeria’s unemployment rate rose to 23.1% from 18.8% in the corresponding period of last year, while combined unemployment and underemployment rates increased from 40.0% in Q3 2017 to 43.3% in Q3, 2018 (READ MORE).
Analysts are waiting to see how the NSE indicators will behave at Thursday session to see if there is any correlation between the budget proposed and the Wednesday’s decline.
Meanwhile, the NSE’s benchmark index four-wave decline extended rising from intraday high of 30,884.63bps, to a low of 30,696.38bps before marginally retracing up at the final minutes to close at 30,704.98 on a positive market breadth.
Midweek market technicals were negative and mixed as traded volume was lower than previous day’s in the midst of positive breadth and strong selling pressure as revealed by Investdata’s Daily Sentiment Report, showing a sell position of 95% and 5% buy volume. The day volume index for total transactions was 0.80.
Energy behind the day’s market performance was up, despite the negative sentiment as reflected in the money flow index at 46.50bps, from previous day’s 37.56bps, indicating that funds entering some stocks in the midst of the prevailing low liquidity in the market.

Index and Market Cap
The NSE All-Share Index for the session fell by 109.21bps to 30,704.98bps from 30,822.33bps, representing 0.35% decline, just as market capitalization dropped by N39.9bn to N11.22tr, after opening at N11.26tr, representing a 0.35% value gain.
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The downtrend was impacted by losses suffered by: Seplat Petroleum, Dangote Cement, Guaranty Trust Bank, Zenith Bank and 11 Plc, among others. This impacted negatively on Year-to-Date loss position, which fell to 19.71%, bringing YTD market capitalization decline to N2.41tr from its opening level in January, representing 17.66% decline during the period.

Bearish Sectors Indices
The sectoral indices were largely bearish except for the NSE Consumer goods and Insurance index that closed higher, while market breadth remained positive with more advancers than decliners in the ratio of 23:18.
Market activities were down in volume and value by 36.46% and 19.46% respectively to 201.1m shares worth N4.1bn, compared to previous day’s 316.2m units valued at N5.09bn, with transaction volume driven by financial services and industrial goods stocks like: Zenith Bank, Lafarge Africa, FBNH, GTBank and Fidelity Bank.
Forte Oil and Diamond Bank were the best performing stocks, after topping the advancers table, gaining 9.85% and 9.62% respectively to close at N26.20 and N1.25 each on market forces and the impact of the merger by Access Bank and Diamond Bank on the sector. Decliners for the day were led by ABBEYBDS and SEPLAT, following their 7.55% and 6.53% slide, closing at N0.98 and N555.20 each, on market forces and profit taking.

Market Outlook
We expect this volatility to be sustained as bargain hunting and portfolio repositioning for year-end to shape performance of the market, with MACD on weekly and daily time frame crossing over on high volume supports uptrend depending on market forces, as the market is still resisting further decline. This is especially as the number of companies hitting new 52-week low reduced.
The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of full year company earnings position and post-election market dynamics. These are likely to drive prices north, or south, while determining market direction before or after the Presidential Election.
Investors should review their positions in line with their investment goals, 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 guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of weak company, economic and market fundamentals.

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CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467