Expect Mixed Trend Ahead of Next Week’s MPC Meeting, Unclear Fixed Income Yields
Market Update for November 16
The nation’s equity market on Tuesday witnessed a positive outing, halting four consecutive days of decline on a high traded volume and rekindled buying interests occasioned by the recent pullbacks in the midst of positive economic data and positive sentiment for financial stocks.
Investors buying sentiments in the equity space resulted from discerning players taking advantage of price corrections in blue-chip stocks as all eyes are on fixed income market yields and the upcoming federal government bonds that had made many players sit on the fence.
As mentioned in our Monday update, technically the NGX index’s action has formed a bullish hammer that supports a reversal, which was confirmed at the end of Tuesday’s trading session on a high volume, driven by FBNH and others. Momentum indicators for the day were bullish, with ADX reading 64.46 and the money flow index looking up at 64.48 points on the daily chart. The continuation of this trend depends highly on the interplay of market forces on Wednesday.
However, the better-than-expected Q3 earnings, interim corporate actions, and positive economic data as well the level of liquidity in the equity market will determine the extent of the expected market rally when it begins, from this pullback. Already too, all eyes are on happenings as regards the global inflation rates and oil prices currently oscillating around $82 per barrel.
Tuesday’s trading started slightly on the downside, before rebounding by the mid-morning and oscillating for the rest of the session on demand for low, medium, and high cap stocks. This situation pushed the composite index to an intraday high of 43,469.31 basis points from its lows of 43,175.64bps and thereafter closed above its opening point at 43,44.20bps.
Market technicals for the day were positive and strong as volume traded was higher than the previous day’s in the midst of a flat breadth and positive sentiments as revealed by Investdata’s Sentiment Report showing 95% buy volume and 5% sell position. The total transaction volume index stood at 1.08 points, just as momentum behind the day’s performance remains relatively strong, Money Flow Index looked up at 64.48 points, from the previous day’s 56.84 points, indicating that funds entered the market.
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Index and Mkt Cap Movement
The key performance index, at the close of Tuesday’s trading, gained 225.48 basis points, at 43,444.20bps after opening at 43,230.341bps, representing a 0.49% growth, just as market capitalization rose by N112bn, closing at N22.67tr, from the opening value of N22.56tr, also representing 0.49% appreciation in value.
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The session’s upturn was due to demand for stocks like Airtel Africa, FBNH, and UBA, among others, which impacted positively on Year-To-Date gain, as it increased to 7.88%. Market capitalization stood at N1.68tr YTD, representing a 7.61% growth from the year’s opening value.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance, Banking, and industrial goods closed higher by 0.39%, 0.11%, and 0.01% respectively, while NGX Oil/Gas index led the decliners after losing 2.49%, followed by Consumer Goods with 0.38%.
Market breadth was at par, as gainers were equal to losers in the ratio of 18:18, while activities in volume and value terms were up after investors had exchanged 423.83m shares worth N11.65bn, compared to the previous day’s 293.43m units valued at N4.293bn. Volume was boosted by trades in FBNH, Sterling Bank, Transcorp, GTCO, and Jaiz Bank.
Cutix and Cornerstone Insurance were the best-performing stocks, gaining 8.33% and 7.69%, and closing at N3.25 and N0.56per share respectively on market forces. On the flip side, Total Energies and Mutual Benefits Assurance lost 9.97% and 6.90% respectively, closing at N216.80 and N0.27 per share, purely on profit-taking.
We expect a mixed trend ahead of next week’s meeting of the Central Bank of Nigeria Monetary Policy Committee (MPC) and the unclear direction of yields in the fixed income market and upcoming FGN Bonds. Also, momentum investing continues as high volume resurfaced after the pullbacks had created new opportunities for players to jump into positions on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the day’s trading revealed that buyers are in control, as the index rebounded. Also, we note that institutional players are not selling but positioning in blue-chip companies, as the pullback was on a light volume. It is equally noteworthy that this pullback at this level is for the accumulation of more positions ahead of year-end seasonality. Also, many stocks are trading within their buy ranges, a situation expected to attract more funds into the equity space, given the Dividend Yield capable of serving as a hedge against inflation.
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