Market Update for The Week ended November 1 and Outlook for Nov 4-8
Stocks closed lower on the Nigerian Stock Exchange over the past week, despite the mixed performance of the composite All-Share index, closing the period on a negative note and extending the seventh consecutive week of decline on a higher traded volume and diverse sentiment.
Within the week, many quoted companies submitted their quarterly scorecards ahead of the October 31 statutory deadline to avoid sanctions, in line with the post-listing requirements of the exchange. In the five trading sessions, over 80 companies released their quarterly numbers, most of which were mixed and even unimpressive, most of which investors are interpreting. There is also the issue of low liquidity.
Movement Of NSEASI
It was a week of mixed performance as the All-Share Index opened on a positive note, gaining 0.14% on buying interest in blue-chip companies like CCNN, Lafarge Africa and Flour Mills. This was however reversed on Tuesday, owing to sell down in telecommunication and banking stocks, after which the index lost 0.53%. This was however reversed at midweek and Thursday, following the positive sentiment for high cap stocks that supported the benchmark index as it gained 0.25% and 0.18% respectively. This gain was however short-lived, as the bears resurfaced on Friday, when the composite index lost 0.24%, on selloffs, bringing the week’s total loss to 0.21%. The NSE benchmark index closed at 26,293.3bps, from its 26,348.73bps opening level.
Low cap stocks dominated the advancers’ chart, with Seplat alone being the high cap stock among the best of performers for the period, owing to its impressive Q3 numbers and an interim dividend of $0.05 announced by the directors. Market breadth for the week, however, closed positive with advancers outnumbering decliners in the ratio of 27:18.
The impetus behind the week’s performance remained weak, as shown by the 31.54bp Money Flow Index, compared with 35.20bps in the previous week, indicating that some stocks had inflows and others outflows as players repositioned their portfolio on the strength of numbers released.
Also, the Investdata sentiment report for the week revealed mixed sentiment with ‘buy’ volume at 48%, while the ‘sell’ position was 52% on a transaction volume index of 1.15.
During the week, Okomu Oil price was adjusted for a dividend of N2.00, while 84 companies released quarterly financials for the period ended September 30, 2019, Also, Global Spectrum Energy Service and Nestle also announced interim dividends of 5 kobo and N25,00 respectively.
Mixed Sectoral Indices
The sectoral indexes performance were largely bullish, except for the NSE Consumer Goods and Banking indexes that lost 0.665 and 0.46% respectively, while NSE Oil/Gas index led the advancers after gaining by 4.96%, followed by the NSE Industrial Goods and Insurance, which rose by 1.05% and 0.33% respectively.
Market activity in terms of volume and value for the week were mixed as volume traded dropped by 26.34% to 1.51bn shares, from the previous week’s 2.05bn units, just as value rose by 1.6% to N16.19bn, compared to previous week’s N16.13bn. The week’s volume was boosted by transactions in VertiasKapital Assurance, Zenith Bank, and FCMB
University Press and Cornerstone Insurance were the best-performing stocks, topping the advancers’ table with 24.36% and 18.40% gains respectively, closing at N1.43 and N0.45 per share at low price attraction and improved Q2 numbers and market forces. On the flip side, Champion Brewery and Afromedia lost 11.76% and 9.76% respectively, closing at N0.90 and N20.37, on negative earnings and sentiment.
We expect mixed performance to continue in the new week, as market players react to earnings reports released so far, with the reporting season officially coming to close. This may trigger speculative trading, at a time of low prices of fundamentally sound stocks ahead of month-end. At the moment, 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 fixed income instruments.
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 under-priced. 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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