Market Update for October 24
Mixed signals from the earnings reports released so far on the Nigerian Stock Exchange continue to influence the decision by market players, following which the composite NSE All-Share index suffered yet another decline again on Thursday, reversing the previous day’s marginal gain on a higher traded volume, but negative sentiments.
The bear dominance in the midst of earnings reporting season is a clear reflection of mixed reactions to the numbers posted, and indeed, the economy, giving that of the 26 companies that have made their quarterly results available, 16 recorded decline in their bottom-line. This is a further indication that all is not, indeed, well with the economy. This is notwithstanding the seemingly positive news that Nigeria moved 15 places up to number 131 in the World Bank Ease Of Doing Business report for 2020 (READ MORE), as it is yet to reflect on the nation’s business environment.
This is besides report by the Central Bank of Nigeria (CBN) that consumer confidence improved by 2.3point to 3.8points in Q3 in an economy with the unemployment rate above 26% and the purchasing power of most Nigerians remains very low. Hopes are that the confidence level would increase when the N30,000 minimum wage is implemented before the end of the year, thereby boosting disposable income and increasing effective demand subsequently.
It is import to note also that the corporate earnings published, so far, have unfolded the real state of the companies and given an insight into how the economy has fared in the last quarter, and what level of GDP growth or decline should be expected from Nigeria’s National Bureau of Statistics for the month of December.
Nonetheless, investors have, so far, reacted mildly to the positive numbers among those due to lack of liquidity.
Meanwhile, Thursday’s trading started marginally on the upside in the morning, oscillating at the mid-morning to the afternoon owing to sell down in some banking stocks that opened positive. This pulled the NSE benchmark index to an intraday low of 26,350.07 basis points, from its high of 26,410.84bps, before retracing up slightly in the last few minutes to close the day lower at 26, 357.24points.
Market technicals for the day were negative and mixed with higher volume traded than the previous day’s in the midst of negative breadth and sentiments, as revealed by Investdata’s sentiment reports showing a ‘sell’ volume of 88% and buy’ position of 12%. The transaction volume index for the day stood at 1.02, just as the energy behind the day’s performance was seriously weak, despite Money Flow Index inching up to read 9.93 points, from the previous session’s 4.02bps, an indication that fund entered some stocks and the market, irrespective of the down market.
Index and Market Cap
At the end of Thursday’s trading, the NSE All-Share Index lost 40.70bps to close at 26,357.24bps from its opening point of 26,397.94bps, which represented a 0.15% slide, just as market capitalization dropped by N19.81bn, closing at N12.83tr, from an opening value of N12.85tr, which also presented a 0.15% value loss.
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The day’s decline was driven by profit-taking and selloffs in stocks such as Guaranty Trust Bank, UBA, FBN Holdings, Lafarge Africa, Flourmills, ad FCMB, which impacted negatively on the NSE’s Year-to-Date loss, increasing to 16.14%, while YTD market capitalization gain stood at N1.12tr, representing a 9.56% improvement over the year’s opening level of N11.72tr.
Bearish Sector Indices
All the sectoral performance indexes were down, except for the NSE Insurance and Oil/Gas that closed up by 0.45% and 0.39% respectively, while the NSE Industrial Goods index led the decliners, losing 0.40%, followed by NSE Consumer goods that dropped 0.28%. And next was NSE Banking which declined by 0.27%.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 20:5; whereas market activities were mixed as volume traded rose 54.41% up, as investors exchanged 449.24m shares, compared to previous day’s 290.94m units, while value suffered 40.985% decline to N1.64bn from midweek’s N2.78bn. The day’s volume was driven by transactions in Omoluabi MFB, FCMB, Transcorp, Zenith Bank and UBA
Forte Oil and Consolidated Hallmark Insurance were the best-performing stocks, topping the advancers table, after gaining 10% and 8.82% respectively to close at N17.60 and N0.37 each, on the takeover offer of N66.25 and industry recapitalization moves. On the flip side, Guinness Nigeria and GSK lost 9.88% and 9.38% respectively, closing at N26.45and N5.80 on poor earnings performance.
We expect the mixed performance to continue, as the market reacts to released numbers in expectation of more quarterly earnings reports, especially as the NSE’s new lows offer investors opportunities to position for short and medium-to-long-term view. Given that earnings and economic news can change trend at any time, keep your gaze on fundamentally sound and dividend-paying stocks for possible capital appreciation as Q3 numbers giving insight into companies’ position and future expectations.
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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