Market Update for November 4
The benchmark All-Share index of the Nigerian Stock Exchange (NSE) started the week positive on Monday, as market players reposition their portfolios as stocks continue to trade at their 52-week, five and 10-year lows, amidst strong fundamentals as recently reflected in their latest quarterly score-cards and earnings/dividend possibilities at year-end. The seeming return of energy at the close of Monday trading is a signal that reversal is underway if this momentum is sustained on the increasing buy interest and improved traded volume.
The benchmark index closed higher, wiping off the previous day‘s loss position, despite the continued volatility and mixed trades during the session. What is clear is that those earnings that beat market and analysts expectations have become the toasts of investors, especially banking and building material stocks, even as as oil prices climb higher, in the midst of the latest directive by the Central Bank of Nigeria (CBN) restricting corporates and individuals from playing in the OMO and treasury bills’ market (READ MORE). It looks like this directive and other unconventional monetary policy measures so far taken have triggered an inflow of funds to the real sector and equity market. Investdata analysts expect that the changing capital formation and flow of funds in the economy will soon begin to influence the market positively, as productivity improves to support the system.
Monday’s trading started on a slightly upside movement in the morning but fluctuated while yet sustaining the positive trend throughout the session, touching an intraday high of 26,433.95 basis points, from its low of 26,293.30bps. It, however, adjusted downward marginally, to finally finish the day above its opening point at 26,401.30 points on a high traded volume.
Market technicals for the day were positive and mixed as volume traded was higher than the previous day’s in the midst of positive breadth and improved buying sentiments, as revealed by Investdata’s reports showing a ‘buy’ volume of 77% and sell’ position of 23%. The transaction volume index stood at 1.61, while momentum behind the day’s performance remained weak, despite the Money Flow Index moving up significantly to read 41.23 points, from the previous session’s 33.05bps. This is an indication that funds entered some stocks and the market.
During the session, stocks like conglomerate- Unilever Nigeria, MRS Oil, Unity Bank, Capital Hotel and RT Briscoe attained their new 52-week low.
Index and Market Cap
At the end of Monday’s trading, the NSE composite index gained 107.76bps to close at 26,401.30bps from its opening point of 26,293.30bps, which represented a 0.41% growth, just as market capitalization was up by N52.45bn, closing at N12.85tr, from an opening value of N12.8tr, which also presented a 0.41% value gain.
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Monday’s upturn was driven by the seeming buying interests in MTN Nigeria, Guaranty Trust Bank, UBA, Zenith Bank, Access Bank, CCNN, PZ Cussons, Honeywell Flour Mills, FBN Holdings, Wema Bank and Champion Breweries. These impacted positively on the NSE’s Year-to-Date loss, reducing it to 16%, while market capitalization gain stood at N1.13tr, representing a 9.65% improvement over the year’s opening level of N11.72tr.
Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Banking and Industrial goods that closed higher by 2.49% and 0.65% respectively while the NSE Consumer Goods index led the decliners after losing 1.27%, followed by NSE Insurance and Oil/Gas that lost 0.73% and 0.12% respectively.
Market breadth turned positive as advancers outweighed decliners in the ratio of 18:12, while market activities were mixed as volume traded was up 52.43% to 368.18m shares from the previous day 241.55m units. Transaction value however suffered a 23.86% decline, from N3.64bn to N2.77bn. This volume was boosted by trades in Access Bank, Law Union, UBA, Zenith Bank and Lafarge Africa.
Champion Brewery and Honeywell were the best-performing stocks, topping the advancers table, after gaining 10% and 9.47% respectively to close at N0.99 and N1.04 each, on market forces. On the flip side, Fidson Healthcare and Unilever lost 10% and 9.93% respectively, closing at N3.60 and N24.05 on unimpressive earnings and selloffs.
We expect the mixed performance to continue on the renew positive sentiment and momentum, as the market continues to interpret the recently released company scorecards and align their portfolios along with the impressive numbers, in expectation of improved liquidity and positive economic data. This is especially as the NSE’s new lows offer investors opportunities to position for short and medium-to-long-term views. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down.
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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