NGSE Investors Position In Banking Stocks, In Continued Portfolio Rebalancing

Market Update for November 7, 2018

It was another difficult and volatile session on the Nigeria stock exchange on Wednesday as the benchmark index gave up Tuesday’s rally, and when it was apparent that there was going to be no follow-through, in the afternoon especially, it took out the lows and sold off. It dropped sharply, closing below the session’s opening point on huge traded volume driven by transaction in Zenith Bank to top the day trading.
The trading session started on a green note in the morning which oscillated up and down till midday before the composite index pulled back sharply in the afternoon after touching intraday highs of 32,218.20 basis points to low of 32,083.25bps. It then retraced up in the last few minutes to close the day at 32,108.30 as motive wave 3 slowed down in the midst of low liquidity and political uncertainties as the February 16, 2019 date for the Presidential election draws closer.
The volume spike in Zenith Bank during the session with money flow index reading 78.40 from the previous day position of 44.70 points signaled the entry of institutional investors as portfolio reshuffling is ongoing ahead of December rally and 2018 full year report. It has been noted that the stock is selling below its book value, leading the sector as the stock with the highest dividend yield. Zenith Bank is currently trading above its 100-Day Moving Average, and 45% below its 52 week high.
Market technicals at the midweek were negative and mixed with huge volume traded amidst, negative market breadth and sentiments, as revealed by Investdata’s Daily Sentiment Report, which showed a sell volume of 81% and buy position of 19%. The volume index for the day’s total transactions was 1.95.
Forces behind the day’s market performance were maintained despite selloffs in high cap stocks. Money flow index for the session rose to 54.30bps, from previous day’s 50.69ps, indicating that funds are entering some stocks and at the same time leaving some stock in the midst of rebalancing.

Index and Market Cap
At the end of midweek’s trading, the All Share Index shed 45.73bps, closing at 32,154.03bps, after opening at 32,154.03bps, representing 0.14% decline, just as market capitalization was slightly down by N16.69bn, closing at N11.72tr, from an opening value of N11.74tr which represents 0.14% dip in value.

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The session’s downturn was impacted by profit taking among high priced stocks like: Seplat, Lafarge Bank, Flourmills, FBNH, Zenith Bank and Dangote Sugar. This impacted the Year-to-Date returns, heightening the loss position to 16.04%, while market capitalization dropped N1.88tr since January, representing 13.89% drop, from the year’s opening value.

Bearish Sectors Indices
Sectorial indexes were largely bearish, except for the NSE Banking that gained 0.19%, in the direction. Market breadth stayed negative with decliner’s outnumbered advancers in the ratio of 23:14, to halt the previous day’s bear market.
Market activities were up in volume and value by 200.75% and 236.92% respectively to 459.14m shares worth of N9.4bn, from the previous day 149.65m units value at N2.79bn. Transaction volume was boosted by financial service stocks like: Zenith Bank, FBNH, Guaranty Trust Bank, FCMB and Access h Bank.
The best performing stocks for the midweek were Niger Insurance and NPF Microfinance that topped the advancer table by gaining 10% and 9.63% respectively to close atN0.22 and N1.48 each on a low price attraction. On the flip side, Aiico Insurance and Lafarge Africa lost 9.86% and each to close at N4.50 and N0.27 each on profit taking

Market Outlook
We expect the current oscillating trend to continue as investors digest company numbers, given that there is no new incentive for the market in November, unless and until there is a change in the narrative.
The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of the expected Q3 GDP and full year company earnings position. These are likely to drive prices north, or south, while determining market direction before or after Presidential Election.
Investors should review their positions in line with 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 volatile amidst mixed company, economic and market fundamental.

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CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467