Market Update for November 14
Stocks closed higher on the Nigerian Stock Exchange (NSE) on Thursday as demand for value and high dividend yield stocks waxed stronger on funds inflow to equity assets due to the recent crash in money market rates, as well as the undervalued state of the market.
The positive sentiments reversed previous day’s losses and pushed the benchmark index north, recording the highest daily gain since May 31, 2019, on a huge volume traded to break out the first resistance level of 26,835.58 that ushers in the markup phase. This is a bullish sign that indicates efforts by smart money, including foreign investors, pension fund managers, insurance companies, stockbrokers and others, to move stock prices. The recent decision by the Central Bank of Nigeria (CBN) to shut out local fund managers, limiting their access to the Treasury Bills investment window, and the sharp drop in money market rates have triggered the circular flow of funds in search of higher returns.
NSE Daily Time Frame Chart
The market’s rally on Thursday and the breakout of the bearish zone as revealed by the magical trend indicator, has set the stage for recovery, despite the expected profit taking and sell down in some stocks to reposition for the year-end rally and the 2019 full-year earnings reporting season in Q1 2020 which is less than 150 days away. Also, notice that high cap stocks selling above N100 were not among the 34 stocks that recorded gains, due to the new price methodology in the market.
Meanwhile, trading on Thursday started on the upside and was sustained throughout the session, on a strong buying interest and high momentum that pushed the NSE’s benchmark All Share index to an intraday high of 26,843.11 basis points, from its low of 26,339.11bps, to close the session significantly higher above its opening figure.
Market technicals for the day were positive and strong, with higher volume traded than previous day’s, in the midst of positive breadth and high buying pressure as revealed by Investdata’s reports showing a ‘buy’ volume of 100% and ‘sell’ position of 0%. The day’s Transaction Volume Index stood at 2.16, while the impetus behind the day’s performance improved with Money Flow Index reading 51.50 points, from the previous session’s 47.07bps. This is an indication that funds entered some stocks and the market at large, terminating selloffs.
Index and Market Cap
The composite NSEASI, at the end of Thursday’s trading, gained a significant 504.00bps, closing at 26,843.11bps from its 26,339.11bps opening, which represented a 1.91% growth, just as market capitalization rose by N245.34bn, closing at N13.07tr, from an opening value of N12.82tr, which also represented a 1.91% value gain.
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The upturn was driven by demand for stocks like Guinness Nigeria, Guaranty Trust Bank, Lafarge Africa, Zenith Bank, Access Bank, UBA, FBNH, Stanbic IBTC. ETI, Wema Bank, Lafarge Africa, Transcorp, UACN, Fidelity Bank, Ekcoorp and Caverton. These impacted positively on the NSE’s Year-to-Date loss, which reduces to 14.60%, and market capitalization gain jump to N1.18 trillion, representing 10.29% up from the year’s opening value of N11.72tr.
Bullish Sector Indices
All sectoral performance indexes for the session were in the green, led the NSE Banking index which closed higher by at 7.04%, followed by NSE Insurances index by 1.96%, followed by the NSE Industrial Goods, Consumer Goods and Oil/Gas with 1.24%, 0.98%, and 0.92% respectively.
Market breadth turned positive as advancers outnumbered decliners significantly in the ratio of 34:3, while market activities were mixed with volume traded rising by 2.34% to 624.84m shares from previous day’s 610.58m units, while value was down by 8.73% from N11.1bn at midweek to N10.02bn. Volume was driven by transactions in Zenith Bank, Access Bank, UBA, Nigerian Breweries, and Sterling Bank.
Ekocorp and Caverton Offshore were the best-performing stocks, topping the advancers table, after gaining 9.79% and 9.76% respectively to close at N3.70 and N2.70 each, on the back of market forces and the strong Q3 earnings position. On the flip side, Ikeja Hotel and Champion Brewery lost 9.38% and 9.09%respectively, closing at N0.87 and N0.90 on weak earnings and market forces.
Market Outlook
Being the last trading day of the week, we expect mixed performance on the back of profit-taking, repositioning in value stocks and portfolio adjustment as market players digest the Q3 scorecards and read unfolding sentiment in expectation of improved liquidity as interest rate in money market is crash ahead of October inflation reports and MPC meeting in fortnight. The recent NSE’s new lows offer investors opportunities to position for short and medium-to-long-term views. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down.
Also, traders and investors need to change their trading strategies due to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future. And another fiscal policy initiative that may provide liquidity for the economy and market.
Take Action
INVEST 2020: Opportunities and Trade Ideas Summit
Sub-Topics
A. Recession or Boom: Five Trading Strategies for Picking Best Stocks in Good Times or Bad- AlhajiGarbaKurfi, Managing Director of APT Securities & Funds Limited.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
