Market Update for December 19
Equity prices on the Nigerian Stock Exchange (NSE) took a dive at the end of Thursday’s trading, following the benchmark All Share Index (ASI) closed lower, maintaining the up and down movement pattern from its year-end oscillation in the midst of positive market breadth and high traded volume.
It was about the hope that liquidity would impact the equity market in no distant time as funds continue to search for higher returns in a calculated risk environment.
Recall that the Central Bank of Nigeria (CBN) spent years tightening rates into low inflation and growing economy, before embarking on its unconventional policies that triggered real growth in the economy, as revealed by the Q3 GDP of 2.38%. It was the one-two punch by the CBN in the form of its hike in Loan to Deposit Ratio, first to 60% at the end of September and 65% by this month-end, which may further rise to 70% next year. Add this to the restrictions of fund managers and other corporate bodies from participating in the CBN’s Open Market Operations, which served as the final blow that set capital flow in motion.
What will trigger another downturn, as the market sets the stage for recovery unless there are political uncertainties and negative macro-economic indices, finally the market forces.
Meanwhile, Thursday’s trading opened slightly on the positive side and fluctuated between the mid-morning and afternoon on profit-booking and selloffs in medium and high cap stocks which dragged the NSE index to an intraday low of 26,536.01 basis points from its high of 26,684.72bps. It later retraced up marginally to close the day at 26,584.45bps.
Market technicals for the session stayed negative and mixed, as volume traded was higher than the previous session, in the midst of breadth favoring the bulls and selling pressure as revealed by Investdata’s Sentiment Report of 33% ‘buy’ volume and 67% sell position. The day’s total transaction volume index stood at 1.03. The impetus behind the day’s performance was down, just as Money Flow Index read 44.07 points, from the previous 52.91bps. This is an indication that funds left some stocks and the market at large.
Index and Market Caps
At the close of trading, the benchmark index shed 81.28bps, closing at 26,584.45bps from the 26,665.73bps, representing 0.30% decline, just as market capitalization lost N38.07bn at N12.83tr, from an opening value of N12.87tr, which also represented a 0.30% depreciation in value.
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The session’s decline was driven by the selloffs and profit-taking in stocks like MTNN, UACN, UBA, Access Bank, International Breweries, and Honeywell, all of which impacted on the NSE’s Year-to-Date loss, raising it to 15.42%. Market capitalization YTD also fell slightly to N1.12tr, representing a 9.51% growth over the year’s opening value of N11.72tr.
Bullish Sector Indices
All sectoral performance indexes closed higher, except for the NSE Consumer Goods index that lost a marginal 0.05%, while the NSE Banking index led the advancers, after chalking 0.55%; followed by the Insurance Index’s 0.48%, and the NSE Oil/Gas, which gained 0.17%, while NSE Industrial Goods index closed flat.
Market breadth was positive as advancers outnumbered decliners in the ratio of 14:10, while market activities were mixed as volume traded increased by 30.74% to 304.13m shares from the previous day to 232.69m units, whereas value declined to N3.15bn, from the previous day’s N3.19bn. The day’s volume was driven by Access Bank, Zenith Bank, FCMB, Guaranty Trust Bank, and Fidelity Bank.
GSK and AG Leventis were the best-performing stocks of the day, gaining 9.52% and 8.78% to close at N5.75 and N0.50 respectively on low price attractions and market sentiments. On the flip side, Cornerstone Insurance and Uacn Property lost 9.80% and 6.61% respectively, at N0.46 and N0.84 on selloffs and profit-taking.
We expect a sustained mixed performance amidst profit-taking and positioning, as investors take advantage of low prices to position, ahead of the usual Santa Claus and year-end rally as capital flow and repositioning in value stocks continue. There are also the changing sentiments in expectation of improved liquidity and positive economic indices.
We expect that Investors would focus on the upcoming full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.
Again, the current undervalued state of the market offers investors opportunities to position for the short and medium-to-long-term. That is why investors should target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year winds down, giving way to 2020, just as was noted in the 10 golden stocks and trading ideas for 2020 discussed last weekend during the Investdata 2020 Traders & Investors Summit.
Also, traders and investors need to change their strategies owing to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.
Meanwhile, we appreciate all that made Invest 2020 Traders and Investors Summit a success. The home study packs are available. To grab your pack, Send Yes or Stock to 08028164085, 08032055467, 08111811223 now.
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