Market Update for February 11
Activities on the Nigerian Stock Exchange (NSE) on Monday had another interesting and volatile session to close higher and extend its seventh consecutive days of bull transition on a high volume traded and positive sentiments for financial services stocks.
The NSE All Share index made a new year-to-date high despite the political tension ahead of Saturday’s presidential and National Assembly elections, after retesting the recent resistance level of 31,891.23 basis points on increasing momentum.
“Followers of the Smart Money Indicator — which says that the “dumb money” trades at the open while the more restrained “smart money” trades at the end of the day — will find this analysis useful.”
If we would use just one characteristic to describe the Nigerian equity market’s performance so far in 2019, late session strength may be the most applicable. Heading into Monday, the NSE’s benchmark index has consistently climbed up in the final hour of trading for the past seven days, except for last Friday when it witnessed a pullback in the final hour. In the prior four sessions of down market, the last hour of trading saw positive returns 8.33% of the time from January 10. This kind of late session strength doesn’t occur often.
Money Flow Index, which tracks smart money or institutional investors’ movement of funds climbed from 19.80 points on January 17 to 71.70 points on Monday, an indication that funds continues to enter the market all this time despite the mixed sentiment.
Monday’s trading started out on the upside in the morning, which was sustained till midday to early afternoon before pulling back on profit taking in some stocks. However, the NSEASI for the session touched intraday highs of 31,891.23bps from a low of 31,515,44bps on strong buying of banking and insurance stocks. This consolidated the previous day’s trading position, after which it closed the session at 31,781.87bps.
Market technicals for Monday were positive and strong, despite the high volume traded which was lower than previous session’s in the midst of a strong breadthand sentiment as revealed by Investdata’s Daily Sentiment Report, showing 71% buy volume with 29% sell position. The day’s transaction volume index stood at 1.67.
The momentum behind the day’s market performance was up, as shown by the 70.7bps money flow index, from previous day’s 64.52bps, an indication that funds are entering the market and some stocks.
Index and Market Cap
The NSE benchmark index on Monday gained 251.95 bps to close at 31,781.87bps having opened at 31, 529.92bps, representing 0.80% growth; while market capitalization rose by N93.96bn at N11.85tr, from the opening value of N11.76tr. This represented a 0.80% value gain.
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The session’s upturn was attributed to price appreciation by stocks like: Nestle, Guaranty Trust Bank, Stanbic IBTC, Zenith Bank, FBNH, UBA, Access Bank, Dangote Flour and Dangote Sugar, among others. This lifted Year-to-Date gain to 1.12%, while market capitalization gained N131.24bn from the year’s opening level of N11.72trillion, also representing a 1.12% growth.
Bullish Sectors Indices
All the sectorial indexes were in the green, with the NSE Banking index gaining 1.92% to lead the day, even as market breadth remained positive with advancers outnumbering decliners in the ratio of 41:10.
Market activities were down in volume and value by 23.72% and 53.79% respectively to 551.59m shares worth N5.65bn, from previous day’s 723.54m units valued at N12.21bn. Transaction volume was largely driven by financial services and conglomerates stocks like: Access Bank, UBA, Diamond Bank, Zenith Bank and Transcorp.
Cadbury and Oandowere the best performing stocks for the day, topping the advancers table with 10% each to close at N11.00 and N5.50 respectively on market forces and sentiment ahead of Q4 earnings reports. The flipside was led by C & I Leasing and Medview Airline, shedding 9.96% and 8.11% respectively to close at N8.14 and N1.70 each, on the back of correction after its share reconstruction, as well as profit taking respectively.
We expect the ongoing volatility to persist, as investors and traders reposition for 2019 dividend declaration season and post-election rally which are expected to shape market performance in the interim. We advise cautious trading and investing while positioning in fundamentally sound equities.
Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on political space and ahead of 2018 full year GDP report expected to hit the market on Tuesday, February 12, 2019, as well as the January inflation data that could come before the presidential election. These are likely to drive prices north, or south, while determining market direction before or after the Presidential Election.
Investors should review their positions in line with their investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals.
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