Expect Mixed Session On Short-term Profit Taking, Ahead Of GDP Data, MPC Outcome

Market Update for November 21
The Nigerian Stock Exchange (NSE) All-Share index resisted further drop below its record lows in the past week, on investors’ increased buying interest and positive sentiments which have supported three trading sessions of bull-run on positive market breadth, despite the seeming low traded volume.
This relatively low traded volume reflected the level of caution by investors and traders ahead of the release of Nigeria’s Q3 GDP report expected to hit the market Friday, as well as next week’s meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC).
We note the rebound in prices of major blue-chip and high dividend-paying stocks in recent times, on the back of an increased tempo of value investing, with a concentration on fundamentally sound stocks selling at a discount. This also affected leading stocks in the various sectors and industries, while high cap stocks selling above N100 continue to lag, arising from the NSE’s latest pricing methodology that helped slow down the southward movement of the NSE’s benchmark index.
Meanwhile, yields on the 364-day Treasury Note has stagnated at 10% over the past week, which equity assets can record in just one on the exchange.
The global economic stability outlook becoming predictable as the three biggest central banks (the Fed, ECB, and BOJ) embark on stimulus in form of QE programmes since August, which has returned aggregate balance sheets of these banks to record highs. This is expected to support economic activities and stock markets with prevailing low rates as a result of an interest rate cut in these economies, as it is expected to redirect the flow of funds to emerging and frontier economies and markets like Nigeria,
Meanwhile, Thursday’s trading started slightly on the downside but retraced up in the mid-morning till afternoon on positive demands for medium and high cap stocks, which pushed the NSE index to intraday high of 26,872.09 basis points, from its low of 26,721.59bps, before closing the day higher at 26,872.09bps on a low traded volume.

Market technicals on Thursday were positive and mixed, as volume traded was lower than previous day’s in the midst of a positive breadth and a strong buying pressure as revealed by Investdata’s sentiment report showing a ‘buy’ volume of 100% and ‘sell’ position of 0%. The day’s Transaction Volume Index stood at 0.84, while momentum behind the day’s performance was down, with Money Flow Index reading 45.44 points, from the previous 50.66bps, indicating that funds left some stocks despite the market closing up.

Index and Market Cap
The composite index NSEASI at the close of trading on Thursday gained 95.91bps, closing at 26,872.09bps from its 26,776.15bps opening, representing a 0.36% up, just as market capitalization rose by N46.36 billion, closing at N12.97 trillion, from an opening value of N12.92 trillion, which also represented a 0.36% value gain.
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The session’s advance was due to buying an interest in stocks like Dangote Cement, MTNN, Stanbic IBTC, Guaranty Trust Bank, FBN Holdings, ETI, Flourmills, FCMB, Oando, UACN, Dangote Sugar, and Wema Bank. These impacted positively on the NSE’s Year-to-Date loss, reducing it to 14.50%, while market capitalization gain increased to N1.24tr, representing 10.66% growth from the year’s opening value of N11.72tr.

Bullish Sector Indices
All the sectoral performance indexes closed higher for the day, except for the NSE Industrial Goods that lost 2.39%, while the NSE Oil/Gas index led the advancers, after gaining 1.68%. It was followed by the NSE Consumers Goods with 0.57% up and next were NSE Banking and Insurance indexes which went up by 0.05% and 0.03% respectively.
The day’s market breadth remained positive as advancers outnumbered decliners in the ratio of 21:11, while market activities were down in volume and value traded by 10.51% and 25.25% respectively to 239.22m shares worth N2.28bn, from previous day’s 267.31m units valued at N3.05bn. Volume was driven by transactions in leading banking stocks like FBNH, Transcorp, Zenith Bank, Guaranty Trust Bank, and UBA.
Cornerstone Insurance and Oando were the best-performing stocks for the session, topping the advancers table, after gaining 10% and 9.89% respectively to close at N0.77 and N3.89 each, on the back of market sentiments and their low price attraction. On the flip side, CCNN and L Jaiz Bank lost 10% and 8% respectively, closing at N18.00 and N0.67on profit-taking.

Market Outlook
Today being the last trading day of the week, we expect the mixed performance on short term profit taking, capital wave and repositioning in value stocks as market players expect Q3 GDP report today. The changing sentiments in expectation of improved liquidity as interest rates drop in the money market ahead of the MPC meeting should guide investors.
The current undervalued state of the market offers 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.

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