Expect Mixed Trading On Value Investing, Selloffs, On Portfolio Alignment Ahead Of Year-end

Market Update for November 7
The continued pullback and volatility on the Nigerian Stock Exchange (NSE) on Thursday is another clear reflection of the lingering low investor confidence and liquidity which had prevailed for months. This is despite the fact that bargain hunters are cashing in on low-priced stocks at different intervals, creating movements and activities in various sectors and stocks. It is true that the low valuation in the market could support gains in the nearest future for intelligent investors that position at these current equity prices.
The All-Share index extended its losing streak for the third consecutive session, closing lower on a higher traded volume, after the market, in the past five trading days of the month recorded just one gain and four losses for the other four sessions. The way investors are going for value stocks is reflecting in the price movement and pattern of accumulation on the exchange.
Trading on Thursday opened slightly green in the early hours of the session before pulling back to oscillate between the mid-morning and afternoon on profit-taking and sell down in blue-chip stocks. This pushed the NSE index to an intraday low of 26,172.35 basis points, from its high of 26,242.53bps, before retracing up marginally to close lower at 26,188.24bps.
The session market technicals were negative and mixed, with higher volume traded than the previous day’s with breadth favouring the bears, amidst negative sentiments, as revealed by Investdata’s reports showing a ‘sell’ volume of 77% and 23% buy’ position. The transaction volume index stood at 2.95, while energy behind the day’s performance remained weak, as Money Flow Index slowed down to 35 points, from the previous session’s 38.62bps. This is an indication that funds exited the market, just as Unilever Nigeria, Fidson Healthcare and the NSE Consumer Goods index touched yet another new 52-week low.

Index and Market Cap
At the end the day’s trading, the benchmark NSEASI closed at 26,188.24bps from its 26,223.66bps opening, representing a 0.14% drop, just as market capitalization dropped by N17.24bn, closing at N12.75tr from an opening value of N12.77tr, which also presented a 0.14% value loss.
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The session’s downturn resulted from profit booking and selloffs in Zenith Bank, Stanbic IBTC, Lafarge Africa, Dangote Sugar, FBN Holdings, Consolidate Hallmark Insurance, Honeywell Flour Mills and Transcorp Plc. These impacted negatively on the NSE’s Year-to-Date loss, lifting it to 16.68%, while the YTD gain in market capitalization dropped to N1.03tr, representing 8.77% up from the year’s opening value of N11.72tr.

Bearish Sector Indices
All the sectoral performance indexes were largely down, except for the NSE Banking index which closed 0.66% higher, while the NSE Consumer Goods index led the decliners, after shedding 1.10%, followed by the NSE Industrial Goods by 0.03%. Meanwhile, NSE Industrial goods and Oil/Gas indices closed flat.
Market breadth was negative as decliners outnumbered advancers in the ratio of 16:9, while market activities were mixed as volume traded was up significantly by 212.75% to 726.19m shares from the previous day’s 232.22m units, while value slipped slightly by 4.91% to N2.97bn from midweek’s N3.12bn. The day’s volume was boosted by transactions in Jaiz Bank, Access Bank, Zenith Bank, Lafarge Africa and FBN Holdings.
Regency Assurance and Chams were the best-performing stocks, topping the advancers table, after gaining 5% and 4.53% respectively to close at N0.21 and N0.24 each, on the back of positive sentiments for the ongoing industry recapitalization and impressive Q3 numbers. On the flip side, Unilever and Fidson Healthcare lost 9.98% and 9.72% respectively, closing at N21.65 and N3.25 on unimpressive earnings and negative sentiment.

Market Outlook
Being the last trading day of the week, ahead of long weekend due to the declaration of Monday as a public holiday by the Federal Government, we expect the mixed performance to continue on the back of value investing and selloffs. Meanwhile, we note that the market would continue interpreting the Q3 scorecards to enable them to align their portfolios, in expectation of improved liquidity and positive economic data. This is especially as the 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 the review of the NSE’s pricing methodology, now that all class of equities need uniform 100,000 units to effect any price changes. This may be part of efforts to mitigate the persistent price decline that has seen many stocks trading at between their five and ten-year lows and even more, in recent times.

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