Friday, February 07, 2020 / 06.10PM / Adesola Borokinni and Bukunmi Adejobi, Proshare research, Header Image Credit: EcoGraphics
Analysts have concluded that Proshare's Dangote and Toni Indexes developed lives of their own in 2019 and are preparing a repeat performance in 2020 as both Indexes broke from trading patterns set by the Nigerian Stock Exchange's All Shares Index (NSE ASI) and the NSE 30 Index between January 2019 and January 2020.
The Proshare Indexes created in May 2019 to serve as bellwethers to provide alternative market information on specific large-cap stocks have traced and retraced overall market movements over the last twelve months. Even though movement between the NSE 30 and Toni Inde,x was close, lags between the trading months and growing investor anxiety created differences in timing and magnitude of Index movements.
Contrary to early expectations that the Dangote and Toni Indexes would mirror the NSE ASI, several actionable opposing market patterns emerged during the year, creating profitable hedging opportunities. The Toni Index comprises of AFRIPRUD, TRANSCORP, UBA and UBCAP while the Dangote Index comprises DANGCEM, DANGSUGAR and NASCON (until recently it also included the erstwhile Dangote Flour).
NSE30 vs Toni Index: Taking on The Bears
With the economy growing at a slow rate of 2.28% in Q3 2019, the local stock market has been bearish. The Toni index and NSE 30 index has alternated between bearish and bullish orientations at different times between May 2019 and January 2020. Both the Toni index and NSE 30 index appeared to be bearish in May, June, July, August, and October 2019; while they also appeared to have turned bullish in September, November of 2019 and in January of 2020. In November 2019, the Toni index was more bullish at +15.33% while NSE 30 was bullish at +6.19%. In December 2019, NSE 30 was bullish at +3.68% while the Toni index was bearish at -0.37%. In January 2020, NSE 30 and Toni index were both bullish and closely knitted at +8.25% and +7.77% respectively.
Chart 1 Toni Vs NSE30 Index Yields Jan. 2019-Jan. 2020
Toni Meets ASI
There was a spike in the Toni index in November 2019 by +15.33% while the NSE ASI experienced positive growth of +2.45%. The sudden spike in the Toni index in November 2019 was the result of the positive changes in four stock prices which make up the Toni index. AFRIPRUD, TRANSCORP, UBA and UBCAP experienced positive growth in share prices by +7.69%, +2.02%, +21.55%, +14.63% respectively with UBA recording the highest increase of +21.55%.
In December 2019 and January 2020 the Toni index and NSE ASI moved in tandem. In December both indexes were bearish, Toni index had a bearish yield of -0.37% while the NSE ASI index had a more bearish return of -0.59% while in January both Toni index and NSE ASI index recorded bullish upward market corrections of +7.77% and +7.46% (see chart 2 below).
Chart 2 Toni Vs NSE ASI Index Yields Jan. 2019-Jan. 2020
The Toni Index and NSE ASI Index have both recorded bearish and bullish movements over time. Chart 2 above shows that the Toni Index has had a better outlook compared to the NSE ASI index.
At periods when both indexes were bullish, the Toni Index appeared to be more aggressive and when both indexes were bearish, the Toni index was less passive than the NSE ASI. For instance, in December 2019, both the NSE ASI and Toni Index appeared to be bearish at -0.59% and -0.37% respectively.
Chart 3 Toni Index Vs NSE ASI VS NSE 30
All three indexes, the Toni, NSE 30 and NSE ASI recorded bullish and bearish momentum in different months. All indexes were bearish in May, June, July and August 2019 except the NSE ASI which was bullish in May 2019.
Chart 2 shows that the Toni index has been able to reveal the direction of the NSE ASI from November 2019 to January 2020 as both NSE ASI and Toni index have both been moving in the same direction.
Toni Vs Dangote Indexes: The Clash of The Powerhouses
The Toni and Dangote Indexes both reported bearish and bullish momentum over different months. Dangote index was bullish at +9.16% in May 2019 while the Toni index was bearish at -5.81%. In November 2019, there was a huge gap between the Toni index and Dangote index, the Toni index was bullish at +15.33% while the Dangote index was bearish at -6.59%.
The most recent data show that both the Dangote Index and the Toni Index were bullish in January 2020 at +24.98% and +7.77% respectively (see chart 4 below).
Chart 4 Toni Vs Dangote Index Jan. 2019-Jan. 2020
Dangote Index Goes Toe-to-Toe with the NSE ASI
The Dangote Index experienced an overall higher yield of +9.16% compared to NSE ASI's +6.55% between January 2019 and January 2020. In May, both indexes saw a substantial rise in Index yield with the Dangote Index taking the lead. Amongst the components that make up the Index, DANGCEM share price rose by +6.67% thereby making it a major factor in the market's bullishness year-on-year (Y-o-Y).
Chart 5 DANGOTE VS NSE ASI Index Yields Jan. 2019-Jan. 2020
Both indexes experienced a continuous decline from June to October 2019 while in November, Dangote Index recorded its lowest decline in 2019 with DANGCEM a large-cap stock pulling the Index down. DANGCEM's share price declined by -4.74% to N142.80 from N149.90 which significantly affected the overall Dangote Index while NSEASI experienced growth of +2.45%.
There was a spike in both indexes in December 2019 while Dangote Index with growth at +29.48% was more bullish than the NSEASI index with a growth rate of +7.46%.
Adding The NSE 30 Into the Mix
The NSE 30 closely tracked the ASI Y-o-Y and so the Dangote Index had mirror relative movement patterns for the NSE 30 as the NSE ASI. The Dangote Index started bullish in May 2019 with the growth of +9.16%, while the NSE30 turned bearish at -1.92% in the same month. From June to August both indexes were bearish. In September 2019, Dangote Index declined to -4.81% with DANGCEM being the major contributor to the decline while DANGSUGAR and NASCON remained flat, DANGCEM share price declined by -6.48% to N151.50 from N162.00 in August 2019.
In January 2019, DANGOTE and NSE 30 index were both bullish at +24.98% and +8.25% respectively. The significant rise in the Dangote index was traceable to the rise in the share prices of all components of the index; DANGCEM, DANGSUGAR, NASCON with a rise of +26.69, +1.47%, +15.83% respectively (see chart 6 below).
Chart 6 DANGOTE Vs NSE 30 Index Yields Jan. 2019-Jan. 2020
The graph reveals the Dangote Index and NSE 30 were both bullish and bearish at odd months.
The Dangote Index Vs The NSE ASI and NSE 30
The Dangote, ASI and NSE 30 were all bearish in June, July, August and October 2019 while the three indexes were bullish in January 2020. In July 2019, DANGOTE, NSE 30 and NSE ASI recorded a significant dip in their values, dipping by -7.43%, -9.27% and -7.50% respectively.
In January 2020, all three indexes were bullish. NSE ASI, DANGOTE and NSE 30 had bullish market momentum that represented an upward movement of +7.46, +24.98% and +8.25% respectively (see chart 7 below).
Chart 7 Dangote Index Vs ASI and NSE 30 Jan. 2019-Jan. 2020
DANGOTE, TONI, NSE ASI and NSE 30 all recorded bearish stock prices in June, July, August and October 2019. In July 2019, NSE ASI, Toni, DANGOTE and NSE 30 recorded a significant dip in stock price by -7.5%, -4.6%, -7.43% and -9.27%. While in January 2020 the NSE ASI, Toni, NSE ASI and NSE 30 all recorded bullish growth in their stock price of +7.46%, +7.77%, +24.98% and +8.25% respectively.
Weighing Against the Toni Index-More Cooks Making Broth
The Toni Index adds another layer of complexity to the Index soup. From mid-2019 the Index with its compatriot Dangote tracked the ASI closely but by June 2019 the bearish momentum of the Index outstripped that of the ASI but outperformed the Dangote Index and the NSE 30. By September 2019 all Indexes huddled upwards with the Toni Index showing the strongest bullishness in association with the NSE 30. December 2019 to January 2020 saw the Dangote Index and NSE 30 storm ahead of both the NSE ASI and the Toni Index. The cement business appears to be recovering as the hospitality business appears flat in the new year, possibly explaining the value growth difference between the Dangote and Toni Index and the strong advance of the NSE 30 which includes the DANGCEM stock (see chart 8 below).
Chart 8 A Happy Family of Indexes Moving Together and Apart
What Is In an Index? Mirroring Reward (and loss)
The study shows that Toni and Dangote index has not at all times shown the overall sentiment of the market. Toni, Dangote, NSE ASI and NSE 30 moved in the same direction in June, July, August, October 2019 and January 2020. At other times the various indexes moved in different directions as some indexes were bearish while some were bullish.
In December 2019 Toni, Dangote and NSE ASI all recorded bearish stock prices were -0.37%, -0.71%, -0.59%, only NSE 30 recorded a bullish growth in stock prices +3.68% while in January 2020, Toni, Dangote, NSE ASI, NSE 30 all recorded bullish stock price of +7.77%, +24.98%, +7.46%, +8.25% with Dangote being the highest.
The Toni index has been able to reveal the direction of the NSE ASI index from November 2019 to January 2020 as both NSE ASI and Toni index have both been moving in the same direction.
Dangote index was also able to reveal the direction of the NSE ASI index consistently from December 2019 to January 2020. In December 2019 both NSE ASI index and Dangote index dipped by -0.59% and -0.71% respectively while in January 2020 Dangote index recorded a spike in its value by +24.98% while NSE ASI Index Value equally turned bullish by +7.46%.
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