Market Update for October 21
Again, prices on the Nigerian Stock Exchange (NSE) closed lower Monday to start the week negative as bearish sentiments continue to deepen despite the earnings reporting season due mainly to the impact of low liquidity and unclear economic direction by government.
Nonetheless, positive numbers have been emanating from the banking sector, as the boards of United Bank for Africa Plc, FBN Holdings, on Monday joined Guaranty Trust Bank, which had earlier published its third-quarter 2019 numbers, all of which may likely trigger buying interests as investors and traders position for the Santa Claus and yearend rallies.
The liquidity level in the market is expected to determine the impact of the oncoming fundamental news, as stocks daily become cheaper with high yields. It is, therefore, very important for traders to keep their gaze on economic news and fundamental developments around the market and the economy at large because these nine months earnings reports will give insights and trading directions about the strength of the numbers, while effectively guiding investment decisions and stock selection.
The global markets, however, maintained positive sentiments, a situation, following which it looks like we have removed another overhang of uncertainty from markets. Now, where do we look to feel the market’s pulse on the Brexit issue? The British Pound, which held up nicely on Monday, despite the delay and the continued debate in the UK parliament. And, as you can see, the pound is trending up to reverse the downward movement of the past 18 months.
Meanwhile, Monday’s trading opened on the downside on the NSE, maintain its volatility on a downtrend as Dangote Cement and banking stocks suffered losses, dragging the benchmark index to an intraday low of 26,382.21 basis points, from its high of 26,449.33bps. But the index retraced up marginally in the final minutes of the session, but still closed lower at 26,390.08bps on negative market breadth.
Market technicals for the day were negative as volume traded was lower than the previous day in the midst of breadth that favoured the bears, and high selling pressure, as revealed by Investdata’s sentiment reports showing a ‘buy’ volume of 12% and sell’ position of 88%. The transaction volume index for the day stood at 0.63. The impetus behind the day’s performance was seriously weak, with the Money Flow Index reading 4.57 points, from the previous session’s 4.45bps. This is an indication that funds exited some stocks and the market.

Index and Market Cap
The benchmark All-Share Index trended down to make new 52-week lower lows, after shedding 58.54bps, closing at 26,390.08bps from its opening point of 26,448.62bps, which represented a 0.22% decline. Market capitalization lost N28.49bn to close at N12.85tr, from an opening value of N12.87tr, which also presented a 0.22% deprecation in value.

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The day’s decline resulted from selloffs and profit-taking in stocks like Dangote Cement, Guaranty Trust Bank, Zenith Bank, UBA, Access Bank, Honeywell Flour, Wema Bank and Transcorp Plc, among others. This impacted negatively on the NSE’s Year-to-Date loss, increasing it to 16.04%, while YTD market capitalization gain fell to N1.13tr, representing a 9.69% improvement over the year’s opening level of N11.72tr.

Bearish Sector Indices
All sectoral performance indexes were in red, except for the NSE Oil/Gas that closed flat, while the NSE Insurance index led the decliners, after losing 1.44%, followed by NSE Banking that dropped 0.45%, while NSE Industrial and Consumer Goods fell 0.28% and 0.01% lower respectively.
Market breadth turned negative as decliners outnumbered advancers in the ratio of 15:9; whereas market activities in volume and value were down, by 20.84% and 72.76% respectively as investors traded 245.85m shares worth N1.36bn, compared to the previous day’s 316.56m units valued at N5.0bn. The day’s volume was driven by transactions in Omoluabi Banks, Fidelity Bank, Transcorp, FBNH and Guaranty Trust Zenith Bank.
May & Baker and Cornerstone Insurance were the best-performing stocks, topping the advancers table, after gaining 9.58% and 9.38% respectively to close at N2.19 and N0.35 each, on earnings expectations and market forces. On the flip side, NEM Insurance and Wapic Insurance lost 9.57% and 8.57% respectively, closing at N2.08 and N0.32 on profit-taking and market forces

Market Outlook
We expect the mixed performance to continue, but on a slowdown as the market reacts to UBA and FBNH numbers in expectation of more quarterly earnings reports, especially as the NSE’s new lows offer traders and 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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Ambrose Omordion
CRO|Investdata Consulting Ltd
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