NGSE Stays Bearish, Selloff Persists, As Economic Indicators Continue To Underperform

Market Update for September 5
The bearish sentiment on the Nigerian Stock Exchange (NSE) extended its stance on Thursday with the composite All-Share index and key sectorial indices sliding further on the back of selling pressure and seeming profit-taking. This is clearly shown in market technicals such as low traded volume and the 100% negative sentiment, although the trading session was mixed.
It was a second consecutive session of pullbacks, which has left the benchmark index trading below its 20-Day Moving Average, signaling the continuation of a confidence crisis in the midst of low liquidity. The situation is being further worsened with the call by Adams Oshiomhole, chairman of Nigeria’s ruling All Progressive Congress (APC) for nationalization of South African businesses in view of the Xenophobia attacks on Nigerians in that country. Known South African company franchises in Nigeria include MTN Nigeria, the biggest telecommunications company by the number of subscribers and most capitalized stock on the NSE; Stanbic IBTC Holdings, a financial services powerhouse; MNET/Supersport, operators of DSTV; ShopRite; and YES; among others.
Such statement will be taken seriously by foreign investors, who remain the dominant force in a market where domestic participation has remained abysmally low, despite promise to grow the numbers by managements of the NSE and the Securities & Exchange Commission (SEC). We would not forget in a hurry that these foreign investors have remained cautious about investing in Nigeria, especially since after the outcome of the 2019 Presidential election that returned President Muhammadu Buhari to the saddle for another four-year term.
The state of the economy was further confirmed by the capital inflow report released also on Thursday by the National Bureau of Statistics (NBS), showing that a total of $5.82bn was imported into the country in 2019Q2, compared to $8.48bn in the previous quarter. This represented 31.4% drop quarter-on-quarter (READ MORE) and was another reason the nation’s GDP as a measure of economic activities recorded yet another slowdown (READ MORE). Conjecturing reasons for the slowdown in such numbers may not take so much effort, given the poor implementation of Nigeria’s 2019 budget, just like the year before it (READ MORE), which the government has seemingly admitted to by announcing plans to roll 60% of this year’s budget over to that of 2020. Plans are afoot already to submit next year’s budget to the National Assembly before the end of this month, with the hope that its passage will not be overwhelmed by political expediencies as in the past budget. We must, however, note that the style of budget implementation and disbursement since 2015, when the then newly inaugurated government announced plans for zero budgeting, which was later abandoned, has kept the economy in this unfriendly situation. A change coming from this new cabinet will give Nigerians the much-needed hope.
Meanwhile, Thursday’s trading opened slightly on the downside, a situation that lasted till midday on low activities, even as trading was dull due to indecision among market players. There was a further pullback by afternoon, especially in the last few minutes, which forced the market to close lower at 27,252.09 basis points, which was not, however, the day’s lowest, as the NSEASI hit an intraday low of 27,252.09bps, from a high of 27,319.64bps.
Market technicals were negative and mixed, as volume traded came lower than previous day’s in the midst of negative market breadth and high selling pressure, as revealed by Investdata’s Daily Sentiment Report. ‘Sell’ volume for the day was 100%, while ‘buy’ position stood at 0% on total daily transaction volume index of 0.65.
The forces behind the day’s performance were weak, but Money Flow Index rose, reading 49.97 points, up from the previous session’s 47.98bps, an indication that funds entered some stocks despite selloffs. It may be suggesting that there is a markup, however, wait to confirm as the market opens on Friday.

Index and Market Cap
The benchmark index, at the close of the day trading, shed 67.65bps, closing at 27,252.09bps, after opening at 27,319.64bps, representing a 0.25% decline. Similarly, market capitalization lost N32.86bn, closing at N13.26tr, from an opening value of N13.29 trillion, which also represented 0.25% value loss.
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The day’s decline resulted from selloffs and profit booking in MTN Nigeria, Zenith Bank, FBN Holdings, UBA, Access Bank, Dangote Sugar, Lafarge Africa, and Honeywell, among others. The loss impacted negatively on the NSE’s Year-to-Date loss, as it climbed to 13.29%, just as YTD market capitalization gain dropped to N1.32tr or 13.02%, from the year’s opening level of N11.72tr.

Bearish Sector Indices
All the sectoral performance indexes were in red, except for the NSE Oil/Gas index that closed marginally in green with 0.08%, while the Industrial Goods index led the decliners, after shedding 0.67%, followed by Banking index which slipped 0.18% down.
Market breadth remained negative as decliners outpaced advancers in the ratio of 17:13; while market activity in volume and value traded fell by 46.76% and 24.76%, respectively at 133.34m shares worth N2.4bn, from the previous day’s 250.45m units valued at N3.19bn. Transactions were driven by trades in stocks such as GTBank, FBNH, Guinness Nigeria, Zenith Bank and Transcorp Plc.
Expectedly, the best-performing stocks for the day were UACN and UACN Property which topped the gainers’ chart with 10% each to close at N5.50 and N0.99 per share on the back of their low price attractions and the proposed restructuring/divestment. On the flip side, Ikeja Hotel and Honeywell lost 9.30% and 7.07% respectively, closing at N1.17 and N0.92 on market forces and profit-booking.

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