Relative stress index points to market rebound this week, says Afrinvest

With the relative strength index (RSI) at 20.5 points at the close of trade last week, analysts at Afrinvest Research say they expect a rebound in the market this week since the index indicates the market is in the oversold region.

They highlighted that the market offers opportunity for re-entry and an upturn in the fortunes of investors in the short term, warning that with no fundamental driver to boost investor sentiment, speculative trading would shape activities pending the completion of the general election in the first quarter of 2019.

“With no fundamental driver to boost investor sentiment on the horizon, we believe the current weak performance will persist, although we expect speculative trading to shape activities pending the completion of the general elections in 2019,” the analysts noted.

A review of trading activities at the domestic bourse in the week ended 14th September 2018, indicates that the bearish run was stretched into the 7th consecutive trading session, following sustained sell-offs on market bellwethers.

The sell offs were stoked by political concerns as well as soft investor sentiment towards frontier and emerging market assets.

However, there was some respite on Friday as the benchmark index advanced.

The Afrinvest analyst said since the rout started at the tail end of January, the Nigerian market has lost 27.3 percent, one of the worst performing within this period, globally.

At the start of last week, the All Share Index declined by 1.3 percent and the bearish performance was sustained till Thursday before the market gained 1.0 percent on Friday.

The largest daily loss in the past 8-months was recorded on Wednesday (-3.5%) as investors sold off bellwethers in the banking and industrial goods sectors.

Accordingly, the benchmark index fell 5.0 percent week-on-week to 32,327.59 points, while year-to-date loss worsened to –15.5 percent.

Similarly, investors lost N624.4 billion as market capitalisation reduced to N11.8 trillion, the lowest level since July 2017.

However, activity level strengthened as average volume and value traded improved 7.6 percent and 40.2 percent to 251.7 million units and N4.7 billion respectively.

The top traded stocks by volume were GUARANTY (73.0m units), ACCESS (68.6m units) and ZENITH (61.1m units) while DANGCEM (N5.0bn), GUARANTY (N2.4bn) and NESTLE (N1.6bn) were the top traded stocks by value.

Sector performance remained largely bearish with all indices declining week-on-week.

The industrial goods index depreciated the most, falling 7.6 percent week-on-week0 following sell off in DANGCEM (-5.8%) and WAPCO (-10.0%).

In the same vein, the insurance and consumer goods indices slid 5.9 percent and 5.4 percent respectively week-on-week due to price depreciation in LINKASSURE (-15.7%) and NESTLE (-8.7%).

The banking index trailed, losing 4.4 percent week-on-week against the backdrop of losses in ZENITH (-4.1%) and UBA (-6.3%) while the oil & gas index dipped 1.7 percent week-on-week.

Investor sentiment stayed soft this week as market breadth weakened to 0.2x from 0.8x in the previous week following 12 stocks that advanced relative to 56 stocks that declined.

The best performing stocks in the week were LAWUNION (+18.5%), UNITYBANK (+17.7%) and SKYEBANK (+15.5%) while CCNN (-26.9%), UNIVINSURE (-24.2%) and FORTE (-16.7%) were the worst performing in the week. Consequent on the poor performance, a number of market bellwethers with strong fundamentals are trading close to 52-week lows – GUARANTY (N31.95), ZENITH (N19.60) NIGERIAN BREWERIES (N84.00), DANGCEM (N200.00).