NGSE Index Shows Recovery Signs, Pulls Back After Touching 27,006.97bps Intra-day High

Market Update for December 17

Tuesday’s trading session on the Nigerian Stock Exchange stayed mixed and volatile, halting the previous day’s bull-run as the All-Share index and closing lower on high selling pressure, after an intraday rally, giving up some of the gains on a high traded volume.

The NSE’s benchmark index tasted the 27,000 mark before pulling back on selloffs in high cap stocks which signaled that recovery is underway, given that factors that support an equity market rally are on the increase.

Another factor was Tuesday’s release of the Consumer Price Index by Nigeria’s National Bureau of Statistics (NBS), showing that the inflation rate rose further, thereby pushing returns from the fixed income market farther into negative territories.  November inflation, according to the data, rose to 11.85% in November of 2019 from 11.61% in October, the highest level in 21 months. Food prices surged amid the continued border closure, low-interest rate in the money market, N600bn released recently for the 2019 capital project, festivities and high demand for goods and services associated with the yuletide season which exerted pressure on prices (READ MORE).

Meanwhile, as promised, President Muhammadu Buhari signed the 2020 budget into law during the day, effectively changing the nation’s budget cycle to January-December for the first time in the 20 years of democracy, a plus for the market and the economy at large (READ MORE). We, therefore, expect that the government will hit the ground running as per the implementation and disbursement of funds, a situation expected to change a whole lot of activities and expectations next year.

Tuesday’s trading opened on the upside and rallied in the mid-morning on earlier buying interest in Dangote Cement before the sell down between midday and afternoon on mixed sentiments that dragged the index to intraday low of 26,643.10 basis points, from its low of 27,006.97bps. Thereafter, it retraced up slightly and closed the day at 26,660.44bps on positive market breadth.

The day’s market technicals were negative and mixed as volume traded was higher than the previous session, in the midst of breadth that favoured bulls, amidst negative sentiments as revealed by Investdata’s Sentiment Report of 5% ‘buy’ volume and 95% sell position. The day’s total transaction volume index stood at 1.12, with energy behind the day’s performance staying strong, just as Money Flow Index read 61.69 points, from the previous 53.22bps. This is an indication that funds entered some stocks, despite the market closing in red

Index and Market Caps

The All Share index, at the close of Tuesday trading shed 34.74 bps, closing at 26,660.44bps from the 26,695.18bps, representing 0.13% drop, just as market capitalization lost N16.77bn to close at N12.87tr, from an opening value of N12.88tr, which also represented a 0.13%  value loss.

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Tuesday downturn was driven by sell down in stocks like Dangote Cement, Zenith Bank, UBA, ETI, International Brewery, Lafarge Africa, NASCON,  and Unity Bank, all of which impacted mildly  on the NSE’s Year-to-Date loss, reducing it to 15.18%. Market capitalization YTD gains also fell slightly to N1.15tr, representing a 9.79% growth from the year’s opening value of N11.72tr.

Bullish Sector Indices

All sectoral performance indices closed higher, except for the NSE Industrial Goods that closed 1.02% lower, while the NSE Banking index led the advancers, gaining 0.62%; followed by the Oil/Gas Index’s 0.95%, while the NSE Insurance and Consumer Goods inched 0.08% and 0.01% up respectively.

Market breadth for the day remained positive as advancers outnumbered decliners in the ratio of 17:11, while market activities were up in volume and value traded by 94.41% and 133.17% respectively to 331.51m shares worth N4.78bn, from the previous day’s 170.52m units valued at N2.05bn. Volume was driven by Access Bank, UBA, Guaranty Trust Bank Zenith Bank, Transcorp Plc and FCMB.

Charms and Guinness were the best-performing stocks for the day, chalking 10% and 9.89% to close at N0.33 and N35.60 each respectively, on low price attraction and market forces. On the flip side, Unity Bank and Cornerstone Insurance lost 7.14% and 6.67% respectively, closing at N0.65 each on selloffs and profit-taking.

Market Outlook

We expect a sustained mixed performance amidst profit-taking and positioning, as investors take advantage of low prices to position, ahead of the usual Santa Claus and year-end rally as capital flow and repositioning in value stocks continue. There are, also, the changing sentiments in expectation of improved liquidity and positive economic indices. We maintain that Investors should focus on the upcoming full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.

Again, the current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term horizons. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down to usher in 2020, just as was noted in the 10 golden stocks and trading ideas for 2020 discussed last weekend during the Investdata  2020 Traders & Investors Summit.

Also, traders and investors need to change their strategies owing to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.

Meanwhile, we appreciate all that made Invest 2020 Traders and Investors Summit a success. The home study packs are available. To grab your pack, Send Yes or Stock to 08028164085, 08032055467, 08111811223 now.

 Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467