Stock Market Remains Bearish on Continuing Cautious Trading

By Goddy Egene

The stock market remained bearish in the first week of 2019 as investors continued to adopt cautious trading following persistent political jitters ahead of general elections next month.

The market, which recovered in 2017 after two years of decline to grow by 42.3 per cent, depreciated by 17.8 per cent in 2018.

Analysts attributed the negative performance of the market in 2018 to rising yields in the United States(US) due to hike in interest rates and the political uncertainties in the domestic economy in the build up to the 2019 elections amidst a sluggish growth in gross domestic product (GDP).

Given the fact that some of the factors still exist, the local bourse maintained a bearish trend last week with the Nigerian Stock Exchange (NSE) All-Share Index (ASI), shedding 1.28 per cent to close at 30,638.90. However, market capitalisation appreciated by 0.78 per cent to be at  N11.426 trillion  due to listing of additional shares of Cement Company of Northern Nigeria Plc.

All other indices finished lower with the exception of the NSE Oil and Gas Index that rose by 2.91 per cent.  The NSE Industrial Index led decliners with 3.9 per cent, followed closely by the NSE Banking Index with 2.7 per cent. The NSE Consumer Goods Index and NSE Insurance Index went down by 1.0 per cent apiece.

Commenting on the market performance, analysts at Cordros Capital said: Our view continues to favour cautious trading in the equities market amidst brewing political jitters ahead 2019 elections, and the absence of a positive market trigger. However, we expect positive macroeconomic fundamentals to drive recovery in the long term.”

The equities market may suffer more decline in the days to come as there is no indication of the return of foreign investors soon. Besides, local investors are still watching the polity and not willing to stake  their money now until after the general elections.

The   Acting Director General of the Securities and Exchange Commission (SEC) Ms. Mary Uduk had said a large percentage of investors  in our market are foreign investors and their exit  continued to impact negatively on the  market.

 “We can see that the impact of increase in interest rate in advanced countries not just US, has impact on capital outflow thereby leading to reduced performance in our markets. I want to say that the interest rate increase in advanced economies not just the US, does not affect only Nigeria but also affects other emerging and frontiers market in the world,” she said.

Also, analysts at CSL Stockbrokers said while prices of equities have depreciated significantly,  it may be too early for investors to take advantage of the low prices.

They said: “Although, we acknowledge that the broad sell off in the market has led to a significant moderation in the share prices of stocks providing opportunities for bargain hunting, we think that the argument for “Buying the dip” frequently advanced by money managers and traders is still too early to call for.

“With growing concerns about a weakening global economy, the U.S Fed providing guidance for two rate hikes in 2019 and more importantly, the elevated political risk in the domestic economy, we expect foreign investors to remain on the sidelines. Hence, we still expect a choppy theme to characterize the nation’s bourse over the short term.”

Market Turnover

The market opened for four trading days last week as the Federal Government of Nigeria declared Tuesday  January 1,  2019 a Public Holiday to mark the New Year celebration.

As a result, a total of 1.647 billion shares worth N8.413 billion in 14,773 deals traded last week by investors  in contrast to a total of 3.129 billion shares valued at N14.348 billion that exchanged hands  the previous  week in 10,394 deals.

The Financial Services Industry  led the activity chart with 1.154 billion shares valued at N5.742 billion traded in 9,174 deals, thus contributing 70.08 per cent  and 68.25 per cent  to the total equity turnover volume and value respectively. The Healthcare Industry followed with 271.277 million shares worth N82.647 million in 219 deals, while the third place was Services Industry with a turnover of 91.734 million shares worth N 208.562 million in 232 deals.

Trading in the top three equities namely, Diamond Bank Plc, Union Diagnostic & Clinical Services Plc and NEM Insurance Plc accounted for 816.016 million shares worth N1.305 billion in 1,615 deals, contributing 49.54 per cent and 15.51 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 395 units of Exchange Traded Products (ETPs) valued at N816,344.70 executed in 13 deals compared with a total of 25,500 units valued at N1.782 million that was transacted  two  weeks ago  in 15 deals.

Similarly, a total of 7,209 units of Federal Government Bonds valued at N6.958 million were traded this week in 8 deals compared with a total of 686 units valued at N689, 162.04 transacted preceding week in three deals

Price Gainers and Losers

Meanwhile, 22 equities appreciated in price during the week, lower than 52 in the

previous week, while 45 equities depreciated in price, higher than 18 of the previous week. Custodian Investment Plc led the price gainers with 16.1 per cent, trailed by Julius Berger Nigeria Plc with 15.6 per cent. Vitafoam Nigeria Plc chalked up 12.5 per cent, while Niger Insurance Plc and Linkage Assurance Plc garnered 9.1 per cent apiece.

Newrest ASL Nigeria Plc and Seplat Petroleum Development Company Plc appreciated by 8.9 per cent and 8.0 per cent in that order.

Other top price gainers included:  Transnationwide Express Plc (7.6 per cent); PZ Cussons Nigeria Plc (7.4 per cent) and Union Bank of Nigeria Plc (7.1 per cent).

Conversely, FCMB Group Plc led the price losers with 16.4 per cent, trailed by ; Glaxosmithkline Consumer Plc  with 15.8 per cent. Access Bank Plc  shed 14.7 per cent, just as Stanbic IBTC Holdings Plc and Dangote Flour Mills Plc went down by 12.6 per cent and 12.4 per cent respectively.

Other  top price losers were: Transcorp Plc (11.4 per cent); BOC Gases Plc (9.9 per cent); CAP Plc (9.6 per cent); Lafarge Africa Plc (9.6 per cent) and Diamond Bank Plc (9.5 per cent).