Market Update for The Week ended November 15 and Outlook for Nov 18-22
Nigeria’s equity market, over the past week, rebounded on improved demand for stocks as Treasury Bills and other money market rates dropped sharply at the end of primary market auction on Wednesday, shedding 150 basis points, when compared to that of October.
This was the first time the 91-day and 182-day bills would be offered at single-digit rates of 7.8% and 9% respectively, since June 15, 2016, just as that of 364-day instruments went for 10%, but remained below the nation’s current inflation rate of 11.24%.
The recent decision is part of the series of measures by the Central Bank of Nigeria (CBN) to redirect liquidity to the real sector in its bid to boost economic activities and productivity, create employment and drive growth. In recent months, the apex bank has undertaken various measures ranging from the hike in Loan to Deposit Ratio, special intervention loans targeted at some critical sectors, at single-digit interest rates, and the latest restriction of the Open Market Operations to the banks and foreign portfolio investors, thereby shutting out other local market players like fund managers, pension fund administrators and insurance companies.
This drop in rates below the official inflation rate implies negative returns, hence the rush by investors push more funds into equity assets and in the process, hedge against inflation, considering the low Price to Earnings Ratio and high dividend yields of the Nigerian Stock Exchange (NSE) at above the 10% offered for the 364-day TBs.
The low TBs and money market rates would expectedly lead to the low cost of funds for manufacturers, increase purchasing power and demand for goods and services needed to oil Nigeria’s macroeconomy, so long as the interest rate level is sustained going forward. The reduced cost of funds and cost of operations would eventually impact positively on corporate earnings, at a time the fiscal authorities seem set to focus more on infrastructural development at different levels of government.

Movement Of NSEASI
Trading on the NSE, last week, sustained previous week’s buying interest that even waxed stronger, recording three sessions of bull-run and one down session, which reversed five consecutive weeks of loss positions.
Trading opened for the week on the NSE, Tuesday, after Monday public holiday, with the index gaining 0.54%, which was short-lived, with the index shedding 0.44% at the midweek, before Thursday’s strong rebound as the index appreciated by 1.91%. This was sustained on Friday with a marginal rise of 0.03%, which bought the week’s total gain at 2.04%.
The NSE All-Share index opened for the week at 26,314.49 basis points and closed at 26,851.68bps, after testing an intra-week high of 26,984.86bps, on strong demand for blue-chip and low cap stocks.
The week’s advancers table was dominated by large and medium cap stocks, as fund managers’ positioned for dividend and capital gains ahead of year-end, as more stocks closed higher, following the frenzied flow of funds into equity assets.
Market breadth for the week closed positive, with gainers outnumbering decliners in the ratio of 39:11.
The impetus behind the week’s performance was strong as Money Flow Index read 51.46bps, compared to 41.67bps in the previous week, indicating that funds entered the market and some stocks.
The week’s price movement and trading pattern showed that market players took advantage of the near rock-bottom prices of fundamentally sound stocks to position ahead of more funds flowing, just as they prepare for the Sancta Claus’ rally and end-of-year window dressings.
Also, the Investdata Sentiment Report for the week revealed strong pressure, with ‘buy’ volume at 80%, and 20% ‘sell’ position, on a transaction volume index of 1.52.

NSEASI Weekly Time Frame
The chart above shows that the NSE index has gradually rebounded on strong positive sentiments and inflow of funds into undervalued stocks on the exchange. The improved buying interest as also confirmed by the market’s candlestick patterns, just as individual equities indicate early markup phase on higher volume traded.
On daily and weekly time frame MACD has turned bullish as the composite index broke out the bearish zone to signal recovery that would be a function of market forces to confirm direction, especially as investors’ buying patterns changed during the week under review.
The index is still trading below the 20-Day Moving Average on a weekly timeframe, but tested the 50-Day Moving Average on a daily time frame to breakout the downtrend line. The Relative Strength Index reads 38.11, which indicates strength, but remains in the oversold region. However, money flow is reading 51.46 points on the weekly chart.

Mixed Sectoral Indices
The sectorial performance indexes close largely bullish, except for the NSE Oil/Gas and Insurance that closed lower by 1.76% and 0.56% respectively, while the NSE Banking index led the advancers after gaining 6.77%, followed by the NSE Industrial and Consumer Goods which were up 3.24% and 2.53%.
Transaction activities, in terms of volume and value for the week, were up by 1.01%% and 83.78% respectively as 2.08bn shares worth N33.87bn, changed hands, as against the previous week’s 2.06bn units valued at N18.43bn. Transaction volume was driven during the week by heavy trading in Zenith Bank, Access Bank, and UBA Plc.
Wema Bank and Cornerstone Insurance were the best-performing stocks for the period, garnering 28.81% and 26.53% gains respectively, to close at N0.76 and N0.62 per share on their impressive Q3 numbers and the ongoing industry recapitalization. On the flip side, Total Nigeria and Learn Africa lost 9.98% and 9.40% respectively, closing at N110.90 and N1.06, on weak earnings and market forces.

Market Outlook
We expect the mixed trend to continue in the new week, on profit booking and improved buying interest on the back of declining yields in the fixed income and rate drop in the money market. We, nonetheless, expect local fund managers to extend their position in undervalued equities with sound fundamentals. As, all eyes are on the domestic economy as macroeconomic indicators look seemingly positive ahead of policy statements and economic reforms. In the meantime, funds are flowing towards equity assets ahead of October inflation report and last MPC meeting for 2019
Discerning investors, nonetheless, should take advantage of the current low stocks valuation to position for medium to long term. It is noteworthy that the market is selling at a discount to give high upside potential.
We would, however, not overlook the possibility of a bargain-hunting motive supporting positive performance, especially with many fundamentally sound stocks remaining underpriced. With a dividend yield of major blue-chips continuing to look attractive in recent weeks, we expect speculative trading to shape the market’s direction, despite the seeming negative outlook.

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CRO|Investdata Consulting Ltd
info@investdataonline.com
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ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467