Mixed Performance May Linger, Ahead Of Sept Inflation Data, Earnings Reports

Market Update for October 14
Going by Monday’s trading activities; it does seem that strength is gradually returning to the Nigerian Stock Exchange (NSE), after long sessions of losses, as the session closed on a positive note with the composite All-Share index recording marginal gains on mixed sentiments but low traded volume.
The proposed budget of every government gives direction on the adopted spending pattern and revenue expectation that expected to support execution, such that it impacts on the economy, depending on the disbursement and implementation style, given that government is the biggest spender. Nigeria’s huge appropriations over the years have, arguably, not adequately reflected in the economy and people. We say this, considering the wide infrastructural gap that has made a mess of the Ease of Doing Business in the country, considering the bad road network, increased cost of operations for businesses and living, rising unemployment rate, low national productivity and weak purchasing power among Nigerians. All of these go to reveal weakness of the economy.
Explanations and budget breakdown is not the challenge here. Instead, it is a question of what the government and its economic team will do differently this time, for the budget and government spending improve the economy and impact the people positively. The end of 2019 is around the corner and the budget and economy are still in shambles, with very poor implementation level that does not speak of a government which such high level of poverty in the country. We feel also, that querying that from the multilateral agencies is more like begging the issues at stake, and indeed laughable, when there are no locally mined statistics to counter the ones put forward by the International Monetary Fund, World Bank Group and others.
It does seem like a deal is possible between US and China to resolve the prolonged trade dispute and bring a relief on the global economy in the short and long term. Whether it looks great or not, or has big long-term consequences, it clears the overhang of uncertainty, now, that has been weighing on markets and the global economy. With that, we’ll get to see what the unfettered power of fiscal stimulus, structural reform and ultra-easy global monetary policy can do for a U.S. economy that already has very solid fundamentals.
Back home, shareholders, on Monday, approved the takeover of Dangote Flour by Olam during a court-ordered meeting in Lagos (READ MORE).
Meanwhile, trading on Monday started marginally on the downside till mid-morning to midday as activities remained dull in most of the high cap stocks, except for Nestle Nigeria and Dangote Cement, before the NSE composite index rebounded by the afternoon, after touching an intraday low of 26,506.56 basis points, from its high of 26,607.06bps, before finishing the day above its opening figure and closing at 26,557.44bps.
Monday’s market technicals were positive and mixed, with traded volume higher than the previous day in the midst of market breadth favoring the bulls, just as there was an improved buying interest as revealed by Investdata’s sentiment reports showing a ‘buy’ volume of 52% and a ‘sell’ position of 48%. Transaction volume index for the day stood at 0.60, the Daily Timeframe- MACD remained bearish, while Money Flow Index remained weak, looking down.

Index and Market Cap
At the end of session, the NSE All-Share Index gained 23.66bps, closing at 26,557.44bps from its opening point of 26,533.78bps, representing a 0.09% growth, just as market capitalization was up by N11.52bn at N12.93tr, from an opening value of N12.92tr, which also presented 0.09% value gain.

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The day’s upturn was driven by margin price appreciation in stocks like Nestle, Dangote Cement, Guaranty Trust Bank, UBA Plc, Transcorp Plc, Fidson Healthcare and Dangote Flour, among others. This impacted slightly on the NSE’s Year-to-Date loss, which slowed down to 15.5%, while YTD market capitalization gain inched slightly to N1.13tr, representing a 10.86% improvement over the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Banking index that closed lower by 0.03%, while NSE Insurance led advancers after gaining 1.85%; followed by the NSE Industrial goods index that were up by 0.22%. The NSE Consumer l Goods and Oil/Gas were flat for the day.
Market breadth turned positive as advancers outnumbered decliners in the ratio of 11:9; just as market activities in volume and value were up by 64.47% and 85.58% respectively to 129.08m shares worth N2.74bn, from the previous day’s 117.38m units valued at N1.5bn. The day’s volume was driven by transactions in GSPEC Plc, Guaranty Trust Bank, Trannscorp, Zenith Bank and FCMB.
Courtville Business Solution and Fidson Healthcare Plc were the best performing stocks, as they topped the advancers table after gaining 10% and 9.72% respectively to close at N0.22 and N3.93 each, on market forces. On the flip side, GSPEC Plc and UACN lost 9.62% and 6.99% respectively, closing at N4.70 and N6.65 on market sentiment and profit taking.

Market Outlook
We expect the mixed performance to continue ahead of economic data, inflation report for September and earnings reporting season as bargain hunters take advantage of the pullback to position ahead actual numbers hitting the market, especially now that NSEASI free fall has slow down at the recent support. However, let the interplay of market forces determine direction.
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 a uniform 100,000 units to effect any price changes. This may be the 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.
Discerning investors should latch onto this, meanwhile, as a way of averaging down and recouping their investment immediately a recovery stage sets in, helped by economic policies, when things start to change gradually. In the process, equity prices will be influenced positively, while investors watch for sectors like insurance, banking, Industrial Goods, services, as well as oil/gas that have become defensive in recent times and could go bullish in no distant time.
Furthermore, we note that all eyes are on the newly appointed economic advisory team to settle down quickly and begin churning out policies capable of turning things around.

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