Bearish streak resumes, as global equities rally on back of cautious China

The local bourse resumed its bearish streak last week as profit taking in Seplat and UAC Properties, brought down the market performance. On the global scene, optimism over trade talks buoyed markets as China slightly de-escalated trade tensions with its proposed retaliation to the latest tariffs imposed by the US put on hold.
Profit taking in SEPLAT at (-18.8 per cent) and UACPROP (-17.8 per cent) dragged the market, halting the positive trend from the previous week.

Losses were recorded on three of five trading sessions during the week, pulling the benchmark index down -1.0 per cent Week-on-Week (W-o-W) to 27,525.81 points while Year-to-Date (YTD) loss worsened to -12.4 per cent.
Similarly, investors lost N133.5 billion as market capitalisation dipped to N13.4 trillion. However, activity level declined as average volume and value pared 50.4 per cent and 31.8 per cent to 142.6 million units and N2.7 billion respectively. The top traded stocks by volume were TRANSCORP (101.8 million units), ZENITH (57.2 million units) and ACCESS (48.9 million units) while MTNN (N4.8 billion), GUARANTY (N1.3 billion) and ZENITH (N1.1 billion) led by value.

Losses in bellwethers, SEPLAT, DANGCEM, GUARANTY and CCNN, resulted in the ASI declining 39 basis points (bps) and 32bps respectively on Monday and Tuesday. However, the trading session on Wednesday ended in the green territory as the benchmark Index rose 2bps following gains in MTNN, CCNN and DANGCEM. The bearish sentiment continued on Thursday as the ASI dipped 0.7 per cent but on Friday, it ended in the green, up 0.4 per cent following gains in MTNN and STANBIC.
Across sectors, performance was bearish as four of six indices under our coverage posted losses W-o-W. The Oil & Gas index led the laggards, paring 10.8 per cent on the back of sell-offs in SEPLAT (-18.8 per cent). Trailing, the Banking and Consumer Goods indices declined 3.5 per cent and 0.6 per cent respectively following price depreciation in ETI (-9.4 per cent), FCMB (-8.8 per cent), INTBREW (-15.2 per cent) and CHAMPION (-9.5 per cent). Similarly, the Industrial Goods index lost 0.3 per cent due to profit taking in DANGCEM (-2.7 per cent). Conversely, the Insurance index was the lone gainer, up 1.2 per cent due to buying interest in CONTINSURE (+11.5 per cent) and MBENEFIT (+10.0 per cent).
Investor sentiment as measured by market breadth (advance/decline ratio) weakened at 0.7x as 24 stocks gained against 35 that declined. The top gainers were JOHNHOLT (+19.6 per cent), CONTINSURE (+11.5 per cent) and UNITYBANK (+11.1 per cent) while SEPLAT (-18.8 per cent), UACPROP (-17.8 per cent) and INTBREW (-15.2 per cent) led the decliners. The bearish streak is expected to continue in the absence of any economy stimulus that would reverse the negative sentiment in the market.

According to Afrinvest, the expectation early in the week, globally, was that China would impose tariffs ranging from 5.0 per cent to 10.0 per cent on $75.0 billion worth of US goods, with the timeline for implementation matching the two phases – September and December 2019 – established by the US.
As the deadline is only a month away, negotiations have resumed, with China more disposed towards a resolution. Meanwhile, the chance of a ‘no-deal-Brexit’ rose in the UK as the Prime Minster got an approval to suspend the parliament till mid-October, paving the way for swift negotiations ahead of the Brexit deadline of 31st October, 2019. While this decision is likely to be tightly contested, the lack of clarity has dampened investor sentiment and the prospects of the UK’s economy post-Brexit.

Performance in the developed markets under our coverage was largely bullish W-o-W, partly because investors reacted positively to softening trade tensions. In the US, the S&P 500 and NASDAQ indices gained 3.1 per cent and 3.0 per cent respectively. The France’s CAC, Germany’s XETRA DAX and UK’s FTSE All Share indices also inched higher by 3.0 per cent, 2.9 per cent and 1.4 per cent respectively despite elevated risks of a ‘no-deal-Brexit’ deal. Meanwhile, Hong Kong’s Hang Seng and Japan’s Nikkei 225 indices lost 1.7 per cent and 3bps respectively W-o-W.

All but 1 of the indices under our coverage in the BRICS market ended in the green territory W-o-W. Brazil’s Ibovespa index led the pack, appreciating 3.6 per cent W-o-W while Russia’s RTS index trailed, gaining 1.7 per cent during the week. South Africa’s FTSE/JSE and India’s BSE Sens indices also advanced W-o-W by 2.2 per cent and 1.7% respectively on the back of renewed investor sentiment in both markets. However, China’s Shanghai Composite index was the lone loser, down 0.4% W-o-W despite better than expected developments on the trade front.

In the African markets under our coverage this week, performance was mixed. Egypt’s EGX 30 index gained the most, up 3.5 per cent while Ghana’s GSE Composite and Morocco’s Casablanca MASI indices followed, advancing 1.8 per cent and 1.0 per cent respectively W-o-W. On the flip side, Nigeria’s ASI led the losers following a 1.0% decline in the benchmark index due to dampened sentiment in the market. Similarly, Kenya’s NSE 20 and Mauritius’ SEMDEX indices lost, shedding 0.4 per cent and 0.2 per cent respectively W-o-W.
Across the Asian and the Middle East market under our coverage, performance trended downward as 3 of 5 indices lost W-o-W. Saudi Arabia’s Tadawul ASI advanced 5.3% following positive sentiment stirred by its inclusion on the MSCI Emerging Market Index. Similarly, Turkey’s BIST 100 index inched 0.4 per cent higher. Conversely, Qatar’s DSM 220 continued its negative trend as it dropped 3.5 per cent while UAE’s ADX General index moderated 2.5 per cent. Also, Thailand’s SET index depreciated 0.5 per cent W-o-W.

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