Analysts blame weak purchasing power, low confidence
Despite the 2019 third quarter (Q3) financial results so far released by some listed companies, the bearish trend that had dominated the market in recent times continued unabated last week.
For instance, at the end of last week’s transactions on the trading floor of the Nigerian Stock Exchange (NSE), the All-Share Index (ASI) and market capitalisation depreciated by 0.32 per cent to close the week at 26,448.62 points and N12.875 trillion respectively.
Similarly, all other indices finished lower with the exception of NSE Insurance, NSE Meri Value, NSE Consumer Goods and NSE Lotus II Indices, which appreciated by 2.37 per cent, 0.17 per cent, 0.12 per cent and 0.46 percent respectively, while the NSE ASeM index closed flat.
A breakdown of transactions last week showed that after several days of decline, renewed bargain hunting on Dangote Cement and 10 other stocks lifted transactions on NSE causing the ASI to appreciate marginally by 0.09 per cent on Monday.
Specifically, the ASI increased by 23.66 absolute points, representing a gain of 0.09 per cent to close at 26,557.44 points. The market capitalisation also gained N11 billion to close at N13.928 trillion.
The upturn was impacted by gains recorded in medium and large capitalised stocks, amongst which were Dangote Flour Mills, Dangote Cement, Fidson Healthcare, Nestle Nigeria and United Bank for Africa (UBA).
Unfortunately, the market reversed the gains, depreciating by 0.2 per cent at the end of trading on Tuesday, following price losses suffered by most highly capitalised.
The index shed 43.75 absolute points, representing a decline of 0.16 per cent to close at 26,513.65 points. Similarly, the market capitalisation lost N21 billion, to close at N12.907 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks, amongst which were MTN Nigeria, GlaxoSmithKline Consumer Nigeria, Dangote Flour Mills, Guaranty Trust Bank and Africa Prudential.
The nation’s bourse extended negative streak at the end of transactions on Wednesday, causing market capitalisation to depreciate further by N20 billion.
Specifically, the ASI fell by 41.45 points or 0.16 per cent to 26,472.20 points. Accordingly, investors lost N20 billion in value as market capitalisation declined to N12.887 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks, amongst which are; Stanbic IBTC Holdings, Lafarge Africa, MTN Nigeria, Ecobank Transnational Incorporated (ETI) and Sterling Bank.
The bears sustained dominance at the end of transaction last week Thursday , as investors’ wealth depreciated further by N50 billion in four trading days.
Precisely, ASI, which opened for transactions on Monday at 26,557.44 points, plunged by 101.15 points or 0.4 per cent to 26,456.29 points. Also, the market capitalisation plummeted by N50 billion from N12,928 trillion to N12.878 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks, amongst which were Guaranty Trust Bank, Dangote Flour Mills, Zenith Bank, United Bank for Africa (UBA) and Lafarge Africa.
The NSE All Share Index plunged further by 0.03 per cent at the close of transactions last week Friday to close trading session at 26,448.62 points.
Analysts have linked the unprecedented lull to the prevailing weak purchasing power and low confidence that have continued to hamper liquidity in the market in the past few months.
With government inability to carry out the economic reforms needed to stimulate growth and productivity, the argued that the trend is likely to persist through the final quarter of the year.
For instance, the Chief Research Officer of Investdata Consulting, Ambrose Omodion, said the prevailing low confidence has continued to hampered liquidity and influence trading negatively, irrespective of the ongoing earnings season.
However, he argued that the divergent movement of the market’s index and the volume traded as revealed by on-balance volume, signals the possibility of reversal.
He added that the reversal would occur only when more earnings reports hit the market with positive reactions to these financials as well as fundamentals of these companies.
“It is, therefore, very important that traders and investors keep their gaze on fundamentals, developments around the market, and the economy at large.
“The quarterly scorecards should guide investment decisions and approach in selecting stocks to position in,” he said.
Codros Securities Limited said: “In our view, the trend witnessed through the year is likely to persist through the final quarter of the year, although we expect pockets of gains over the final months of the year as fund and portfolio managers realign portfolios prior to the start of 2020.
“Nonetheless, we note that valuations remain attractive driven by price deterioration throughout the year. Hence, we advise that long-term investors consider appropriately timed investments.”
Further analysis of last week’s trading indicated that a total turnover of 896.610 million shares worth N16.561 billion were recorded in 12,638 deals by investors on the floor of the exchange in contrast to a total of 1.409 billion shares valued at N31.959 billion that changed hands in 13,616 deals during the preceding week.
The financial services industry (measured by volume) led the activity chart with 597.154 million shares valued at N6.721 billion traded in 7,197 deals; thus contributing 66.60 per cent to the total equity turnover volume .
The consumer goods industry followed with 102.130 million shares worth N7.214 billion in 2,027 deal. The service industry ranked third with a turnover of 84.001 million shares worth N377,017 million in 264 deals.
Trading in the top three equities namely, Guaranty Trust Bank Plc, Global Spectrum Energy Services Plc and Flour Mills Nigeria Plc. (measured by volume) accounted for 302.285 million shares worth N5.510 billion in 1,290 deals.
A total of 1,397 units of Federal Government Bonds valued at N1.518 million were traded this week in 9 deals compared with a total of 2,519 units valued at N2.670 million transacted last week in 12 deals.
Also, 19 equities appreciated in price during the week, lower than 20 in the previous week. 23 equities depreciated in price, lower than Thirty-33 equities in the previous week, while one hundred and 124 equities remained unchanged.