Mixed Performance May Linger On NGSE, As Investors Digest 2019Q3 Score-cards

Market Update for October 28
Bargain hunting on the Nigerian Stock Exchange (NSE) continued Monday, as market players took advantage of the prevailing low equity prices at the peak of the ongoing earnings reporting season to reposition for month-end and year-end season. This, expectedly, pushed the benchmark All-Share index to a positive close to start the week on positive sentiment after six consecutive weeks of decline on a seeming improved buying interest in the midst of not-so-impressive numbers from the companies, as well as economic data.
Also, the mixed macroeconomic indices emanating from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) are yet to reflect on the system or give direction as to where exactly the economy is headed. Furthermore, this is irrespective of the fact that the apex bank is adopting unconventional monetary policy measures to address the economic slowdown and channel funds to the private sector in its bid to stimulate national productivity and growth.
The recently released manufacturing index for the month of October continued its expansionary growth, with Purchasing Managers’ Index (PMI) at 58.2 points, from 58 points in September, resulting in slow growth for the 31st consecutive month. The accompanying components of the PMI such as production levels, new orders, suppliers’ delivery time, employment level and raw material inventories, all recorded back-to-back growth. That notwithstanding, however, the corporate earnings of manufacturing companies remain weak and mixed, indicating that all is not well with the sector.
Monday’s trading opened slightly on the upside in the morning, oscillating to sustain a positive trend throughout the session as discerning investors accumulated positions in the building materials’ sector. This pushed the index to an intraday high of 26,394.37 basis points, from its low of 26,348.73bps, before closing the day above it opening figure at 26,384.45 points on a higher traded volume.

Market technicals for the day were positive as volume traded was more than the previous day’s, with the breadth favouring the bulls and positive sentiments, as revealed by Investdata’s sentiment reports showing a ‘sell’ volume of 22% and buy’ position of 78%. The transaction volume index for the day stood at 2.17, just as the momentum behind the day’s performance was seriously weak, despite the Money Flow Index moving up significantly to read 23.20 points, from the previous session’s 9.65bps, an indication that fund entered some stocks and the market.

Index and Market Cap
At the end of Monday’s trading, the NSE All-Share Index gained 35.72bps to close at 26,384.45bps from its opening point of 26,348.73bps, which represented a 0.14% up, just as market capitalization rose N17.39bn up, closing at N12.84tr, from an opening value of N12.83tr, also presenting a 0.14% value gain.

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The day’s upturn was driven by the seeming buying interests in stocks like Lafarge Africa, Cement Company of Northern Nigeria (CNN), Flour Mills, Wema Bank, FCMB Holdings and Transcorp Plc. These impacted slightly on the NSE’s Year-to-Date loss, as it reduced to 16.05%, just as YTD market capitalization gain climbed to N1.12tr, representing a 9.58% improvement over the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Industrial and Consumer Goods that closed 1.58% and 0.10% up respectively, while the NSE Insurance index led the decliners, shedding 0.46%, followed by the NSE Banking and Oil/Gas indices that dropped 0.02%.
Market breadth turned positive as advancers outnumbered decliners in the ratio of 12:7; whereas market activities were mixed as volume traded rose 27.5% up, as investors exchanged 485.9m shares, compared to the previous day’s 371.04m units, while value fell by 51.9% to N1.08bn, from Friday N2.52bn. The day’s volume was driven by transactions in Veritas Kapital Insurance, Zenith Bank, Courtville, Access Bank and Transcorp Plc.
Courtville Business Solution and Tripple Gee were the best-performing stocks, topping the advancers table, after gaining 9.52% and 8.41% respectively to close at N0.23 and N0.64 each, on market forces. On the flip side, Livestock Feeds and UACN lost 8% and 7.69% respectively, closing at N0.46and N6.00 on profit booking.

Market Outlook
We expect the mixed performance to continue, as the market reacts to released numbers in expectation of more quarterly earnings reports ahead of month-end portfolio alignments, especially as the NSE’s new lows offer investors opportunities to position for short and medium-to-long-term views. Given that earnings and economic news can change trend at any time, keep your gaze on fundamentally sound and dividend-paying stocks for possible capital appreciation as Q3 numbers giving insight into companies’ position and future expectations.
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 uniform 100,000 units to effect any price changes. This may be 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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