Post Views: 220 Market Update for September 16 Trading activities on the Nigerian Stock Exchange (NSE) on Monday failed to follow through the fourth c...
Market Update for September 16
Trading activities on the Nigerian Stock Exchange (NSE) on Monday failed to follow through the fourth consecutive sessions of yet another attempted rally that would have confirmed a recovery move. This would have happened, but for the pullback in the final minutes of the trading session, due to selloffs and profit booking in high and medium cap stocks that dragged the benchmark All Share index lower on a very high volume.
This seeming failure of the attempted rally will be confirmed by market forces on Tuesday, as all days of the rally do not need to be up, some may be down. However, the low of the most current rally must not be under-cut otherwise; the rally would be considered a failure.
Profit-taking on Monday short-lived the impact of positive news that triggered the previous days’ buying interests despite, even on a day that crude oil prices rocketed higher, with WTI rallying just under 14% from Friday’s close in what was the largest one-day gain since February 19, 2009. The oil price jump followed Saturday attack on Saudi Arabia’s facilities that cut global oil output by about five million barrels per day, for which the U.S fingered Iran. There is always a relation between the oil price performance and the nation’s equity market, given the fact that the benchmark index has tended to be up when oil price rally, arising from the fact that crude has remained Nigeria’s largest single revenue earner despite years of attempts to boost non-oil revenue. A look at this largest one-day move in crude oil price in 10 years suggests something fundamentally different may have happened, considering that the NSE’s benchmark went in the opposite direction, even as market technicals remained positive.
On Monday also, the Federal Government finally constituted a private sector populated Economic Advisory Council with such personalities as Prof. Chukwuma Soludo, former Central Bank of Nigeria (CBN) governor; and two former members of the CBN’s Monetary Policy Committee (MPC), including the council’s chairman, Prof. Adedoyin Salami (READ MORE). One thing sure from the committee membership is that they would understand the workings of the fiscal and monetary authorities for the good of the economy. Many analysts have applauded the announcement as a breath of fresh air.
One thing that is clear, that the market is preparing the stage for another bear rally and recovery. However, if it breaks out of the resistance 27,800.05 basis points level and retraces down, it is a sign that the force behind it is still weak. It will nonetheless be until the benchmark index takes out the July high of 28,144.58bps to kick-start real recovery, depending on market sentiments and economic fundamentals which are expected to shape investors decision.
Meanwhile, Monday’s trading opened on the upside and sustained the move till the early to mid-afternoon before pulling back on profit-taking, touching intraday low of 27,538.33bps, from a high of 27,984.08bps. It thereafter inched up marginally to finish the day lower at 27,574.32bps on positive breadth.
Market technicals during the session were positive and mixed, as volume traded was higher than previous day’s in the midst of positive market breadth and high selling volume, as revealed by Investdata’s Daily Sentiment Report, showing ‘sell’ volume of 92%, while ‘buy’ position stood at 8% on total daily transaction volume index of 1.21.
The energy behind the day’s performance was weak, despite Money Flow Index moved up to 34.89 points, from the previous session’s 26.26bps irrespective of the increased selling position. This indicates that funds are entering some stocks and the market as reflected in the day’s traded value. The current stock prices and the earnings powers of companies as revealed by their half-year Price/Earnings ratios and the general market show that there are high upside potentials if the economy improves. As market PE ratio stands at 7.13x.
Index and Market Cap
At the end of day trading, the NSE All-Share Index lost 204.68bps closing at 27,574.43bps after opening at 27,779.00bps, representing a 0.74% drop, just as market capitalization shed N99.64bn to close at N13.42tr from an opening value of N13.52tr which also represented 0.74% value loss.
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The day’s decline resulted from selloffs and profit-taking in stocks like Dangote Cement, Airtel Africa, Dangote Flour, Forte Oil Unilever, CCNN and Dangote Sugar, among others. This impacted positively on the NSE’s Year-to-Date loss, which dropped to 12.74%, even as YTD market capitalization gain stood at N1.63tr, representing 13.91%, from the year’s opening level of N11.72tr.
Bullish Sector Indices
All the sectoral performance indexes were in green, except for the NSE Industrial Goods that closed in red, shedding 1.14%, while the NSE Banking index led the advancers, after gaining 1.57%, followed by Insurance index with 1.21%; just as Consumer goods dropped by 0.22%.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 25:13; while market activity in volume and value were up by 64.55% and 10.87%, respectively at 271.24m shares worth N2.91bn, from the previous day’s 165.34m units valued at N2.26bn. This volume was driven by trades in financial services stocks- FBNH, Guaranty Trust Bank, Access Bank, Zenith Bank, and Fidelity Bank.
Cornerstone and NEM Insurance were the best-performing stocks, after gaining 10% and 9.55% respectively to close at N0.33 and N1.95 per share, on the proposed primary market activity and market forces. On the flip side, Unity Bank and Airtel Africa lost maximum 10% each, closing at N0.63 and N315on profit-taking and selloffs.
We expect a mixed performance as profit-taking from this short rally is expected, while bargain hunters take advantage of low prices of equity to position, now that index had reversed down. Discerning investors should latch on it to average down and recoup their investment immediately a recovery stage is set through economic policies and things start to change gradually to influence equity prices positively, while investors watch these sectors that have become defensive recently like insurance, banking, industrial goods, services, and oil/gas that will go bullish in no distance time. Also, with all eye fixed on the newly appointed economic advisory council to settle down and kickoff.
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