Market Update for November 5
Stocks closed mixed on the Nigerian Stock Exchange (NSE) at the end of Tuesday’s trading as volatility continued with investors taking positions in reaction to recently released quarterly earnings, amidst selloffs among high cap stocks just as portfolio reshuffling ahead of the year-end. The NSE’s composite All-Share index closed lower on mixed sentiments, halting previous day’s bull-run on a high traded volume and positive market breadth.
Despite the seeming slowdown in the market’s positive momentum, the possibility of a breakout of the prolonged downtrend is high as the NSE index attempted crossing over the 20-Day Moving Average on a relatively improved buying interest in medium and low cap stocks, in line with the new rules of the exchange that reduced price movement of highly-priced stocks to manage the decline in the All Share Index.
The much-anticipated end of to the lingering trade war between the U.S and China is expected to boost growth outlook and positive sentiments given the influence of the fiscal stimulus, structural reforms and ultra-easy global monetary policy can do for economies already having solid fundamentals. These will come in the form of low unemployment, improved consumer credit-worthiness, low debt-service ratio, well-capitalized banks, low inflation, stable power supply, and good road network. The world’s low-interest-rate environment is likely to boost global assets and inflows for emerging markets going into the New Year.
Meanwhile, trading on Tuesday opened on the upside slightly in the morning before turning red by the mid-morning and oscillating between the midday and afternoon with accumulation in some banking stocks and others. There were also selloffs in some high cap stocks, pushing the index to touch intraday low of 26,299.86 basis points, from its high of 26,447.96bps. It, however, retraced up marginally, to close the day at 26,375.35bps.
Tuesday‘s market technicals were weak and mixed as volume traded was lower than the previous day’s in the midst of positive breadth and mixed sentiments, as revealed by Investdata’s reports showing a ‘buy’ volume of 51% and sell’ position of 49%. The transaction volume index stood at 1.30, while energy behind the day’s performance remained weak, as Money Flow Index slowed down to 39.48 points, from the previous session’s 41.23bps. This is an indication that funds exited the market but entered some stocks as portfolios rebalancing is ongoing. During the session, Guinness Nigeria made new 12 years low.
Index and Market Cap
The NSEASI, at the end Tuesday’s trading, shed 25.71bps to close at 26,375.35bps from its 26,401.30bps opening, which represented a 0.10% drop, just as market capitalization lost N12.51bn, closing at N12.84tr, from an opening value of N12.85tr, which also presented a 0.10% depreciation in value.
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The day’s decline resulted from the resumed selloffs and profit-taking in stocks like MTN Nigeria, Nestle, Guaranty Trust Bank, Uacn Property, Honeywell Flour Mills, and Transcorp Plc. These impacted negatively on the NSE’s Year-to-Date loss, which rose to 16.08%, while market capitalization gain stood at N1.12 trillion, representing a 9.54% improvement over the year’s opening level of N11.72tr.
Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Consumer Goods that closed lower by 2.17%, while the NSE Banking index led the advancers, after gaining 1.27%, followed by NSE Insurance by 0.33% and others were flat.
Market breadth remained positive as advancers outweighed decliners in the ratio of 17:9, while market activities were mixed as volume traded fell 17.35% to 304.28m shares from the previous day 368.18m units. Transactions value climbed up by 44.25% to N3.99bn from Monday’s N2.77bn. Volume was driven by trades in Law Union Insurance, UBA, Zenith Bank, Guaranty Trust Bank and Guinness Nigeria
The best-performing stocks were Law Union and Unity Bank, topping the advancers table, after gaining 9.52% and 9.43% respectively to close at N0.46 and N0.58 each, on the ongoing industry recapitalization and market forces. On the flip side, UACN Property and Honeywell Flour Mills lost 9.30% and 5.77% respectively, closing at N0.97 and N0.98 on unimpressive earnings and profit-taking.
Market Outlook
We expect the mixed performance to continue on renewed positive sentiment and momentum, as the market continues to interpret the recently released company scorecards and align their portfolios along with the impressive numbers, in expectation of improved liquidity and positive economic data. This is especially as the NSE’s new lows offer investors opportunities to position for short and medium-to-long-term views. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down.
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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