NGSE Indicators May Sustain Rebound, As Investors Await MPC Outcome, PMI Crosses 50pts
Market Update for November 18
It was a midweek of volatility and improved momentum on the Nigerian Stock Exchange, with the All-Share index rebounding on renewed buying interests after three successive sessions of profit booking. The market retracement, was as forecast in our recent market updates: that the pullback will not last, but create opportunities for smart and discerning investors to take position.
The trading pattern and recovery move on Tuesday signaled this upturn, despite closing lower. This tempo was maintained at midweek’s session amidst the demand for banking stocks, ahead of their Q3 numbers, as well as other highly capitalized equities, which pushed the benchmark index higher on an above-average traded volume and positive breadth.
This mixed trend is expected to continue until after the Central Bank of Nigeria Monetary Policy Committee meeting next week. Given the current negative macroeconomic indices, liquidity level in the system and positive sentiment for equity assets, the stock market remains the most attractive for smart money and traders, even as we advise that investors only target equities with sound fundamental that are building a new bullish base.
Meanwhile, the two bank score-cards released by Wema Bank and Union Bank of Nigeria during the trading session came mixed and flat, are giving players insight to what should be expected from the first-tier banks whose numbers are yet to be made available to market. Despite the fact that banks are not paying interim dividend at this time, the Q3 numbers are very important as they give an insight into the capacity of these companies to pay dividend, whether they will offer more, or less, at the end of the current financial year.
Midweek’s trading opened on a gap up and was sustained throughout the session on increased buying interest in blue-chip stocks that pushed the composite index to an intraday high of 34,832.043 basis points, from its low of 34,226.756bps. Thereafter, it closed higher than it opened at 34,818.01bps.
Wednesday’s market technicals were positive and mixed with lower volume traded than the previous day’s in the midst of breadth that favoured the bulls on a high buying pressure, as revealed by Investdata’s Sentiment Report showing 98% ‘buy’ volume. Total transaction volume index stood at 1.26 points, just as momentum behind the day’s performance was strong and turning up as Money Flow Index reading 83.19 from the previous day position of 82.52 points. This is an indication that funds entered the market.
Index and Market Caps
At the end of midweek’s trading, the composite NSEASI gained 575.18bps, closing at 34,818.01bps, representing a 1.70% growth, after opening at 34,242.85bps; just as market capitalization rose by N300bn to N18.19tr, after opening at N17.89tr, which also represented 1.70% value gain.
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The day’s uptrend was resulted from price appreciation in blue-chips like Dangote Cement, Lafarge Africa, Zenith Bank, Guaranty Trust Bank Nigerian Breweries, Dangote Sugar, Access Bank and Fidelity Bank, among others. This impacted positively on the Year-To-Date gain which increase to 29.71%, while Market capitalization YTD returns stood at N5.24tr, representing a 40.40% growth above the year’s opening value.
Mixed Sector Indices
Performance indexes across sectors were largely bullish, except for the NSE Insurance and Oil/Gas that closed 0.36% and 0.15% lower respectively, while the NSE Consumer Goods led the advancers’ after gaining 2.98%, followed by the NSE Industrial Goods and Banking that closed 2.81% and 2.53% higher respectively.
Market breadth turned positive as advancers outweighed declinersin the ratio of 38:8, while transactionsin volume and value terms were downby 92.94% and 30.97% respectively, with investors exchanging 661.13m share shares worth N8.3bn, compared to the previous day’s 9.56bn units valued at N12.02bn. The day’s volume was driven by trades in Transcorp, Guaranty Trust Bank, Zenith Bank, Access Bank and UBA.
Sterling Bank and Linkage Assurance were the best performing stocks, gaining 10% each at N2.09 and N0.55 per share on the back of market trends and impressive earnings. On the flip side, Cornerstone Insurance and Regency Assurance lost 8.62% and 8.33% respectively, closing at N0.53 and N0.22 per share, on market forces and profit booking.
We expect the market to maintain the turn up on the positive news of Purchasing ManagerIndex crossing the 50 points in November to 50.2 points from 49.6 points in October after six months of contraction according to CBN reports. This is the first positive hint of some growth in a long while, even as all eyes are on banks’ Q3 numbers and next week’s MPC meeting outcome, just as technical indicators reveal overbought on a weekly and daily chart, while RSI read 70 points and above, a situation that supports correction. However, the strong and faster recovery may continue, depending on market forces going forward. This will depend on the quality of Q3 score-cards 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 sector 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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