Volatility May Persist In NGSE As Q3 Earnings Guide Portfolio Rebalancing

Market Update for November 28

Selloffs continued on the Nigerian Stock Exchange (NSE) at the midweek, consolidating six consecutive trading sessions of bearish transition with the composite index receding further on improved volume traded.
The recent losses reflects indifference by investors to the already prolonged correction and profit taking in blue chip companies like Dangote Cement, Nigerian Breweries, Zenith Bank, FBN Holdings, UBA and Access Bank which hit their 52-week low. This prevailing bear dominance reflects the dwindling confidence and weak economic fundamentals resulting from a pure lack of economic direction and coordination by the Federal Government. This is made worse by the political uncertainties ahead of 2019 elections and end of the month activities.
Mid-week’s trading opened with the NSE’s benchmark index started the day on a back-and-forth movement before gaping up at the mid-morning session and pulling back by midday to afternoon on selloffs in highcap stocks. During the period, the index touched intraday highs of 31,295.97 basis points from a low of 30,993,97bps after breaking down the psychological line of 31,000 to test a new support level before retracing up to finish the session at 31,023.47bps on a strong selling sentiment.
Midweek’s market technicals were negative and mixed as volume traded was higher than previous day’s amidst negative market breadth and strong selling pressure as revealed by Investdata’s Daily Sentiment Report, which shows a sell volume of 90% and 10% buy position. The volume index for the day’s total transactions was 0.88. The momentum behind the market’s performance was weak, as Money Flow index dropped to 30.66bps, from previous day’s 41.11ps, indicating that funds are leaving some stocks and the market in the midst of low liquidity.

Index and Market Cap
Midweek’s session ended lower as the All Share index shed 150.24bps, to close at 31,023.47bps after opening at 31,173.71bps, representing 0.48% decline, just as market capitalization lost N54.83bn to close, at N11.33tr from an opening value of N11.38tr, representing a 0.48% dip in value. On Tuesday, the NSE’s ASI lost 406.01bps, or 1.29%, just as market capitalization closed N149bn lower.

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Wednesday’s downturn was impacted by losses suffered from medium and high cap stocks likes NB, Dangote Cement, Zenith Bank, UBA, Access Bank, Diamond Bank, FBNH and Oando, increasing the Year-to-Date loss to 18.89%. Market capitalization YTD decline increased to N2.26tr from its opening level in January, representing 16.84% drop.

Mixed Sectors Indices
All sectorial indices were down, except for the NSE Insurance and Consumer goods that closed green, just as market breadth was negative with decliners outnumbering advancers in the ratio of 23:12.
Market activities were up in volume and value by 21.39% and 0.80% respectively at 220.4m shares worth N2.75bn, from previous day’s 187.74m units valued at N2.73bn. Transaction volume was boosted by financial services stocks like: Access Bank, FCMB, Diamond Bank, UBA and Regency Assurance.
Continental Reinsurance and May & Baker were the best performing stocks, topping the advancers’ table, after gaining 10% and 9.96% respectively to close at N1.87 and N2.54 each on market forces and sentiment. The decliners’ side was led by Diamond Bank and NEM Insurance that lost 9.88% and 8.83% respectively to close at N0.73 and N2.37 each , on market forces and profit taking

Market Outlook
As the share prices of more companies hit new 52-week low, expect sustained bargain hunting to shape performance of the market ahead of month end, since there is no immediate incentive for the market except the low prices as more stocks hit their 10-year low.
The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of the expected Q3 GDP and full year company earnings position. These are likely to drive prices north, or south, while determining market direction before or after Presidential Election.

Investors should review their positions in line with investment goals, strength of the company 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.

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