Market Update for December 7
Volatility on the Nigerian Stock Exchange continued Monday, as key the benchmark All-Share index closed lower on a selling pressure due to mixed sentiments arising from oscillating oil prices at the global markets, the increasing cases of COVID-19 infections and the likelihood of a second round of lockdowns, all of which now weigh down equity prices, despite news of the discovery of vaccines.
The recovery of oil prices in the international market around $49 to $50, which should have been a source of happiness, given that it is above the 2020 and 2021 budget benchmark price, continue to threaten the Nigerian economy, by increasing the inflationary pressure with pump price of petrol on the upward direction.
The deregulation of petrol, according the government, is to be blamed for the fourth increase in five months, pushing the cost of production and transportation up from from N121.50 to N123.50 in June, N140.80 –N143.80 in July, N148 to N150 in August, N158 to N162 in September and from N163 to N170 just last month.
These policies and price changes without plans and practical effort by the government to cushion their effects on the system, have been a source of the cost-push inflation, made worse by the spate of insecurity in the land and mismatch of economic policies which has impacted negatively on the economy. These rising fuel price and electricity tariffs have been a major concern for investors and consumers.
The nation’s equity market however remains technically strong on a daily time frame to trade above the shortest moving average of seven days with the index testing the 20-DMA as its recent strong support level on a less than average traded volume and positive breadth. This correction again, is creating a buy opportunities for discerning traders and investors. A breakdown of the 20-day moving average will confirm the short term distribution.
Meanwhile Monday’s trading opened slightly on the upside till mid-morning before vacillating in the midday to late afternoon on profit taking and cautious trading, which pushed NSE index to an intraday low of 35,064.36 basis points, from its high of 35,140.81bps, before closing the session below its opening figure at 35,064.36bps.
Market technicals were negative and mixed, as volume traded were higher when compared to the previous day in the midst of breadth that favoured the bulls on a negative sentiment as revealed by Investdata’s Sentiment Report showing 100% ‘sell’ volume. Total transaction volume index stood at 0.55 points, just as the momentum behind the day’s performance was relatively strong with the Money flow index looking up to read 64.19pts, from the previous day’s 52.72pts, an indication that funds enter the market despite profit taking.
Index and Market Caps
At the close of Monday’s trading, the All-Share index lost 73.63bps, closing at 35,064.81bps, representing a 0.21% decline, after opening at 35,137.99bps; just as market capitalization fell by N39.23bn to N18.33tr, after opening at N18.37tr, which also represented 0.21% value loss.
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The downtrend resulted from profit taking and selloffs in stocks likes Guaranty Trust Bank, Zenith Bank, NB, Dangote Suagr, Lafarge Africa, Access Bank, and Ecobank TransnationaI, among others. This dragged Year-To-Date gain down marginally to 30.63%, while Market capitalization YTD gain stood at N5.37tr, representing a 41.10% growth above the opening value.
Mixed Sector Indices
Sectoral performance indexes were mixed, except for the NSE Banking and Consumer goods that closed lower by 0.84% and 0.31% respectively, while NSE Insurance led the advancers after gaining 0.48%, followed by the NSE Oil/Gas and Industrial goods that were up by 0.17% and 0.07% respectively.
Nonetheless, market breadth turned positive, as advancers’ outnumbered decliners in the ratio of 17:15, while activities in volume and value terms were mixed, and volume traded climbed by 14.34%, as players crossed 324.32m shares, compared to previous day’s 292.86m units, while value traded fell by 26% to N3.19bn, from Friday’s N4.29bn. Volume was driven by trades in UBA, FBNH, Access Bank, Mutual Benefits Assurance and ETI.
Livestock Feeds and NNFM were the best performing stocks, gaining 9.92% and 9.90% respectively at N1.33 and N6.88 per share on the back of low price attraction and improving earnings. On the flip side, Transcorp Hotel and ETI lost 10% and 8.47% respectively at N3.60 and N5.40 per share, also on market forces and unimpressive earnings reports.
Market Outlook
We expect a mixed trend to continue in the midst of cautious trading, funds finding it way forex market, profit taking, portfolio rebalancing and repositioning ahead of the seasonal trends, just as the market awaits inflow of funds from alternative investment and adjustment in CBN policies. Behind this correction lies buy opportunities for discerning traders and investors.
Also important is the fact that technical indicators reveal overbought on the weekly and daily chart, while RSI reads 70 points and above, a situation that supports the likelihood of another correction.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by the quality of Q3 earnings presented, especially by the tier-1 banks, even as analyses of numbers released so far have helped repositioning of investors’ portfolios on the strength of sectoral and company’s performances.
The NSE’s index action and indicators are looking up in the same direction on a very high traded volume and positive buying sentiments.
Again, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the rest of the year.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08032055467
