NGSE: Mixed Performance Still, As Investors Await 2019Q3 Earnings, Amidst Liquidity Hiccups

Market Update for October 10
Market bears again stepped forward on the Nigerian Stock Exchange (NSE), but at a slower pace, as selloff followed through by bearish minded institutional and fund managers selling down their positions due to the nation’s weakening economic fundamentals and divergence in monetary and fiscal policy formulation.
The slowdown in the losing momentum may not be unconnected with investors, analysts and economists studying the proposed 2020 budget estimates, even as they continue to x-ray the impact of the 2019 Appropriation bill yet.
The U.S consumer price index for the month of September and the associated inflation recorded a decline. This position, therefore, supports the call for a third interest rate cut, as the reported decline still points to the impact of the ongoing trade war with China, the second-largest economy in the world, which has dented business investment. Growth is also being restricted by the fading stimulus from last year’s $1.5tr tax cut package, just as the core CPI readings for the month were moderated by the growth recorded in healthcare costs.
A lot of attention has been given to trade quotas, intellectual property theft and the challenges encountered by U.S. companies while accessing the Chinese markets. What hasn’t been talked about as much is the currency issue. Yet China’s Yuan is at the core of it all.
China has used a weak currency to leapfrog almost the entire world over the past 30+ years, capturing 15% of the global economic market share and rising to economic power. They’ve gone from a $350 billion economy in the early 80s, to a $13 trillion economy today.
That’s how they got here, and we’ve talked in recent weeks how they are attempting to stay here, going back to what they know, weakening the currency, as a tool to fight the impact of the tariff hikes.
Meanwhile, Thursday’s trading on the NSE started marginally on the downside and was sustained throughout the session, amidst selling pressure on high cap and blue-chip stocks reduced. However, the index touched an intraday low of 26,578.03 bps, from its high of 26,599.87bps, before finishing the day at 26,583.75points on negative sentiments.
Market technicals for the session were negative and mixed, with lower traded volume than the previous day in the midst of market breadth favoring the bears, and selling pressure, as revealed by Investdata’s sentiment reports showing a ‘sell’ volume of 74% and a ‘buy’ position of 26%. The transaction volume index for the day stood at 1.69. The Daily Timeframe- MACD remained bearish, while Money Flow Index remained weak as it looking down.

Index and Market Cap
At the end of Thursday, the NSE All-Share Index shed 15.19bps, closing at 26,583.75bps from its opening point of 26,598.94bps, representing a 0.06% drop, just as market capitalization lost N7.39bn at N12.94tr, from an opening value of N12.95tr, which also presented 0.06% value loss. If you measure from the beginning of 2019, till now, it seems as though stocks have suffered serious losses, shedding around 20% for the year.
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The day’s downturn resulted from selloffs in stocks like Flour Mills, UBA Plc, Ecobank Transnational Incorporated, Custodian Investment, Fidson Healthcare, Transcorp Plc, and Honeywell, among others. This impacted negatively on the NSE’s Year-to-Date loss, which increased to 15.42%, while YTD market capitalization gain reduced to N1.14 trillion, representing a 10.92% improvement over the year’s opening level of N11.72tr.

Bearish Sector Indices
All the sectoral performance indexes were in red at the close of business, led by the NSE Insurance index which lost 1.17%; followed by the NSE Banking and Consumer goods indexes that were down by 0.24% and 0.07% respectively. The NSE Industrial Goods shed 0.01% while NSE Oil/Gas was flat.
Market breadth remained negative, as decliners outnumbered advancers in the ratio of 15:8; just as market activities in volume and value were mixed. While volume was down 38.54% to 363.26m shares, compared to the previous day’s 591.04m units, whereas transaction value rose by 157.03% to N19.02bn from midweek’s N7.4bn. The day’s volume was driven by transactions in Dangote Cement, Access Bank, FCMB, Zenith Bank and Africa Alliance Insurance.
Learn Africa and Livestock Feeds Plc were the best-performing stocks, as they topped the advancers’ table after gaining 9.82% and 9.30% respectively to close at N1.23and N0.47 each, on market forces. On the flip side, WAPIC Insurance and Linkage Assurance lost 8.57% and 7.84% respectively, closing at N0.32 and N0.47 on market sentiment.

Market Outlook
Despite, being the last trading day of the week, we expect the mixed performance to continue Friday on selloffs, as bargain hunters take advantage of the pullback to position ahead of quarterly scorecards, especially now that the NSEASI has 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.
Also, traders and investors will from on Friday, begin to adjust to a review of the NSE’s pricing methodology, introduced 21 months ago on January 29, 2018. The import of the review is that unlike in the past, where volume required to change stock prices were graduated according to its price (N100 and above per share, below N100 and then N5 each), investors now need a uniform 100,000 units to effect any price changes. This may be the part of efforts to mitigate the persistent price decline that has seen many stocks trading at between their five and ten-year lows and even more, in recent times (READ MORE).
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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