Equities

NSE Drops 25.82% From Jan-High, As 2019 Concerns Drags Investor Sentiments Lower

Market Update for September 10, 2018

Trading on the Nigerian Stock Exchange (NSE) extended its downtrend on Monday to start the week, consolidating four consecutive sessions of decline that finally broke down the psychological line of 34,000 mark on a low traded volume. Since January 2018 when the NSE hit its five-year peak at 45,312.82 basis points, the NSE has lost 25.82% to rank the worst performing market in the globe, as well as the MSCI Emerging Market Index that had decline by 20% from its high on both an intraday and closing basis. This officially puts the index in bear market territory.
The emerging markets had suffered this fate due to the rate hike in developed economies and markets which put pressure on the upcoming markets as funds were exiting the equity market for another investment window in US Treasury Bills as yield almost hit 3.2%. However, the Nigerian stock situation worsened the slowdown in economic activities that resulted in the fragile growth that was supported by the non-oil sector. Knowing that the strong recovery recorded in 2017 as revealed by the GDP is weak, considering the Q1 2018 GDP figure of 1.95% that declined to 1.5% by Q2 GDP released by NBS. Add this to the heightened political risk as the 2019 general elections draw closer on daily basis with the gale of defections without a clear economic plan or agenda to revitalize or boost the economy from the politicians and their team.
The composite NSE All-Share index started the day on a gap down, which was sustained in the mid-morning till afternoon as it made lower lows to touch intraday lows of 33,594.44 basis points from a high of 34,014bps, before retracing up marginally to close the day lower at 33,611.69bps on a high selling pressure.
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Market technicals for the day were negative with high sell sentiments, low volume traded and negative market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ volume of 96% and ‘buy’ position at 4%. Volume index was 0.58 of the day’s total transactions.
Momentum behind the day’s market performance was weakened, as shown in the money flow index at 37.98bps, down from previous day’s 43.54bps, indicating that funds are still leaving the market despite the few kobo stocks that appreciated in the midst of the prevailing low liquidity in the market.

Index and Market Cap
The NSE index at the end of the trading session shed 426.22bps, closing at 33,611.69 basis points, after opening at 34,03791bps, representing a 1.25% decline, just as market capitalisation lost N155.6bn, closing at N12.27tr, from N12.45tr representing a 1.25% value loss, that further deepening investors loss position.
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Monday, downturn was impacted by selloffs in medium and high cap stocks like Nestle, NB, Guaranty Trust Bank, Zenith Bank, Access Bank, UBA and GSPEC that further impacted negatively on the NSE’s Year-to-Date return now at 12.11%. Market capitalisation within the period dropped to N1.34 trillion, or 9.84%.

Bear Sector Performance
Sectorial performance for the day was bearish, as all indices closed red. Market breadth was negative as decliners outnumbered advancers in the ratio of 21:11 to continue bearish run.
Volume and value were down by 11.74% and 34.29% respectively to 137.63 million shares worth N1.36 bilion, from the previous day’s 155.95 million units valued at N2.07 billon.
Transactions for the day were boosted by trading in financial service stocks that witnessed increased trading to top the activity chart, like: Diamond Bank, UBA, Guaranty Trust Bank, Fidelity Bank and FNBH.
Sunu Assurance (Equity Assurance) and Union Diagnostic were the best stocks as they topped the advancers’ table, after gaining 10% and 7.4% respectively to close at N0.22and N0.29, purely on market sentiments and low-price attraction. On the flip side, Nestle and GSPEC were the worst, losing 9.7% and 9.4% respectively to close at N1,355 and N5.75 on market forces and profit taking.

Market Outlook
We expect the market to maintain this volatility as bargain hunters take advantage of the low-price regime, in the midst of continued selloff and political risk, especially as primaries kick off any moment from now.
Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space, while analysing the actual numbers released has given basic insight into companies’ earnings power that are likely to drive prices and determine the market.
Investors should review their positions in line with investment goals, strength of the company’s 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.

Attention
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Ambrose Omordion
CRO|Investdata Consulting Ltd

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