Equities

Reversal Ahead, As NGX Resists Further Decline, Investors Ride On Pullback

Market Update September 14

The mixed trading and trend continued on the Nigerian Exchange Tuesday as the key performance NGX All Share Index inched up on a low traded volume and negative breadth, halting the previous six consecutive days of bear transition.

This seeming return of strength after a long downtrend signals the possibility of an uptrend reversal underway on the strength of market forces and news, with all eyes on the Treasury Bills’ auction which begins today. There is also the Consumer Price Index report for the month of August expected to be release by the National Bureau of Statistics (NBS), ahead of the two-day regular meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), which opens tomorrow. Added to these is the letter by President Muhammadu Buhari seeking the Senate approval for more foreign borrowing in the midst of the nation’s already high debt profile and huge cost of servicing these locally and international debts.

Technically, the market seems to have resisted further decline after forming an inverted hammer candlestick on Monday in the midst of mixed sentiments with the 58% ‘buy’ volume and 42% ‘sell’ position with market players’ interests in financial and industrial goods supporting the market. The NGX index action and candlestick formation of many stocks revealed mixed sentiment and the psychology of players across all classes of stocks, especially the medium and low cap equities that dominated the gainers table for a while now.

Meanwhile, Tuesday’s trading started slightly on the upside before oscillating mildly between the midday to afternoon on selloffs and buy interest across the major sectors, in high, medium and low cap companies. This situation pushed the composite index to an intraday high of 38,936.99 basis points, from its lows of 38,897.68bps, after which it closed slightly above the opening point at 38,920.50bps.

Market technicals were weak and mixed as volume traded was higher than that of the previous day in the midst of breadth favoring the bears and mixed sentiment as revealed by Investdata’s Sentiment Report showing 58% ‘buy’ volume and 42% sell position. Total transaction volume index stood at 0.99 points, just as impetus behind the day’s performance was relatively weak, with Money Flow Index looking down at 24.79points, from the previous day’s 36.14points, an indication that funds left the market, despite flat market at the end of the day.

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Index and Market Caps

The NGX All Share Index, at the close of Tuesday’s trading inched up by 4.88 basis points, closing at 38,920.50bps, from its opening level of 38,915.62bps, representing a 0.01% up, just as market capitalization rose marginally by N2.5bn, closing at N20.28tr, from the opening value of N20.28tr, also represented 0.01% value gain.

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Tuesday’s upturn was driven by demand for Lafarge Africa, Zenith Bank, Flour Mills, Vitafoam, and United Capital, among others, which impacted  Year-To-Date loss mildly, as it reduced to 3.35%, just as the loss in market capitalization YTD stood at N790.17bn, representing a 3.71% decline from the year’s opening value.

Mixed Sector Indices

Performance indexes across the sectors were mixed, as the NGX Industrial Goods and Banking closed 0.13% and 0.09% higher respectively, while the NGX Insurance Index led the decliners after losing 0.85%, followed by Oil/Gas and Consumer goods with 0.39% and 0.08% respectively.

Market breadth was negative, as losers outpaced gainers in the ratio of 21:14, while activities in volume and value terms were mixed after stockbrokers traded 228.48m shares worth N1.88bn, compared to the previous day’s 201.1m units valued at N2.53bn. Volume was driven by trades in Wema Bank, Access Bank, UBA, Mutual Benefits and FidelityBank.

UPDC and Academy Press   were the best-performing after gaining 9.93% and 5% and closing at N0.51 and N0.21 per share respectively on market forces. On the flip side, SCOA and Veritas Assurance lost 9.72% and 8.70% respectively, closing at N1.30 and N0.21 per share, purely on selloffs.

Market Outlook

We expect reversal as all eyes are TB auction rates, August Inflation data and MPC meeting, just as investors and traders are taking advantage of market pullbacks to reposition, while many stocks remain undervalued and at the same time are trading within their buy ranges, a situation expected to attract funds into the equity space given the high dividend yields capable of serving as a hedge against inflation. Also, institutional investors and others continue to digest the Q2 GDP growth ahead of more first-tier bank results, as well as the continued repositioning of portfolios for the year’s last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform. The day’s lowvolume suggests that institutional investors and others are still cautiously looking at the numbers. It is noteworthy that oil price rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.

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