NGSE Volatility Persists Amidst Improved Buying Interest, As More 2019Q3 Earnings Pour In

Market Update for October 23
Midweek’s trading activities on the Nigerian Stock Exchange (NSE) remained volatile, while halting six consecutive sessions of decline on a seemingly improved buying interest in the midst of earnings influx, as more companies made available their 9-month scorecards to the investing public.
These companies include: Zenith Bank, Total Nigeria, Learn Africa, Africa Prudential, Cadbury Nigeria, BOC Gas, VeritasKapital Assurance, Aluminum Extrusion, and Multiverse.
In summary, the results were a mixed performance for banking stocks and its index, despite the relatively impressive numbers, considering their current market value which makes stocks in the sector attractively, especially for dividend investors looking at the high yield, ahead of full-year financials.
Since Guaranty Trust Bank made available its Q3 numbers on October 16, others like UBA Plc, FBN Holdings, and Zenith Bank followed, the sector’s index has lost 2.93%, as earnings reports from some of the large Nigeria banks received a mild welcome from investors to reflect the low liquidity and confidence in the market. The sectoral index is now side-trending after breaking down the recent support of 321.85 to test the low-end of its range at 315.72 points. A breakout of this range up or down will be a function of market reaction and the performance of other banks that are yet to release their numbers.
We would also note that prior to last year’s fourth quarter’s mixed trend, the index has been oscillating. That trend is now repeating itself; with the general market remain dicey.
Meanwhile, trading at the midweek opened slightly in the upside in the morning and oscillated between mid-morning to the afternoon as selloffs hit some banking stocks and others, dragging the NSE index to new intraday lows of 26,294.57 basis points, from its high of 26,410.91bps. Thereafter, it rebounded with the help of Dangote Cement, UBA, FBNH and others that appreciated in value, closing higher than the opening figure at 26,397.94bps amidst negative breadth.
Market technicals for the day were weak and mixed with volume traded lower than the previous day with breadth favouring the bears and high buying pressure, as revealed by Investdata’s sentiment reports showing a ‘buy’ volume of 89% and sell’ position of 11%. The transaction volume index for the day stood at 0.80, just as the impetus behind the day’s performance was seriously weak. Money Flow Index for the day read 4.02 points, from the previous session’s 4.04bps, an indication that fund exited some stocks and the market, irrespective of the up market.

Index and Market Cap
At the end of Wednesday’s trading, the composite NSE All-Share index reversed up, gaining 32.11bps to close at 26,397.94bps from its opening point of 26,365.83bps, which represented a 0.12% up. Market capitalization was up N15.63bn, closing at N12.85tr, from an opening value of N12.83tr, which also presented a 0.12% value gain.
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The upturn for the day was due to buying interest in Dangote Cement, UBA, FBN Holdings, and others. This impacted mildly on the NSE’s Year-to-Date loss, reducing it to 16.01%, while YTD market capitalization gain inched to N1.13tr, representing a 9.60% improvement over the year’s opening level of N11.72tr.

Bearish Sector Indices
All the sectoral performance indexes were in red, except for the NSE Consumer goods that closed flat, while the NSE Banking index led the decliners, losing 0.80%, followed by NSE Insurance that dropped 0.55%. And next was NSE Oil/Gas and Industrial goods that dip by 0.32% and 0.07% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 11:8; whereas market activities in volume and value were down, by 58.09% and 64.5% respectively, as investors traded 290.94m shares worth N2.78bn, compared to the previous day’s 694.12m units valued at N7.83bn. The day’s volume was driven by transactions in Omoluabi MFB, UACN Property, Zenith Bank, Guaranty Trust Bank, and FBNH
Omoluabi MFB and UAC Property were the best-performing stocks topping the advancers table, after gaining 10% and 9.6% respectively to close at N0.55 and N1.09 each, on market forces. On the flip side, Union Diagnostic and Lasaco Assurance lost 8.33% and 7.14% respectively, closing at N0.22 and N0.26 on profit-taking.

Market Outlook
We expect the mixed performance to continue, as the market reacts to released numbers in expectation of more quarterly earnings reports, especially as the NSE’s new lows offer traders and investors opportunities to position for short and medium-to-long-term view. Given that earnings and economic news can change trend at any time, keep your gaze on fundamentally sound and dividend-paying stocks for possible capital appreciation as Q3 numbers giving insight into companies’ position and future expectations.
Also, traders and investors need to change their trading strategies due to the review of the NSE’s pricing methodology, now that all class of equities need uniform 100,000 units to effect any price changes. This may be 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.
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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