NGSE: Mixed Outlook Amidst Profit-taking, As Investors Reposition Ahead Of MPC Meeting

Market Update for November 20
It was a volatile and mixed session on the Nigerian Stock Exchange (NSE) at midweek’s trading as buying interest among market players was renewed, despite the opening of the FGN primary market bonds offer on that day. Many stocks maintained an uptrend, closing the day higher on positive sentiment. The composite All-Share index rallied to breakout the psychological line of 27,000 basis points mark before pulling back to short-term support.
The ongoing interpretation of October inflation data that hit 11.61%, giving an insight into what should be expected in the remaining months of the year, since factors expected to heighten the inflationary pressure continue to lurk around. These include the demand for food and non-food items to support further, as well as the festivities associated with the year-end that could push inflation rate to around 12% in November.
We expect that more economic data such as the Q3 GDP would likely hit the market on Friday ahead of next week’s meeting of the Central Bank of Nigeria (NSE) Monetary Policy Committee. These reports are expected to help the committee members make informed decisions and vote appropriately at their meeting.
We noted the improvements in market performance on the back of the continued decline in fixed income yields and money market rates. However, it is not known how long this low rate regime will persist, as it may depend on the outcome of the MPC meeting. This will also determine how long fund managers and institutional investors will position in highly liquid and fundamentally viable stocks irrespective of profit-taking by speculators and traders.
Meanwhile, trading on Wednesday opened on the upside in the morning and was sustained till afternoon on increasing demand for financial sector and consumer goods stocks, which pushed the NSE’s benchmark index to an intraday high of 27,035.28 basis points, from its low of 26,750.49bps. It then pulled back in the last few minutes, before closing the session higher at 26,776.15bps on a low traded volume.

Midweek market technicals were positive and mixed, as volume traded was lower than previous day’s in the midst of a positive breadth and higher selling pressure as revealed by Investdata’s report showing a ‘sell’ volume of 91% and ‘buy’ position of 9%. The day’s Transaction Volume Index stood at 0.84, while the impetus behind the day’s performance was strong, with Money Flow Index looking reading 50.66 points, from the previous 49.65bps, indicating that funds entered some stocks and the market. This is notwithstanding the sell-down in high cap stocks like Dangote Cement and MTNN.

Index and Market Cap
At the end of Wednesday’s trading, the composite NSEASI gained a marginal 36.71bps, closing at 26,776.15bps from its 26,739.44bps opening, representing a 0.14% growth, just as market capitalization went up by N17.72bn, closing at N12.92tr, from an opening value of N12.91tr, which also represented a 0.14% value gain.

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The day’s upward swing was impacted by demand in stocks like Guaranty Trust Bank, Zenith Bank, FBN Holdings, UBA, Access Bank, Wema Bank, FCMB, Conoil, UACN, NB, Dangote Sugar, and Transcorp. These impacted positively on the NSE’s Year-to-Date loss, reducing it to 14.81%, while market capitalization gain increased to N1.18 trillion, representing 10.23% growth from the year’s opening value of N11.72tr.

Bullish Sector Indices
All the sectoral performance indexes were in the green, except for the NSE Industrial Goods that lost 0.45%, while the NSE Banking index led the advancers, after gaining 1.79%. It was followed by the NSE Consumers Goods with 1.27% up, followed by NSE Insurance and Oil/Gas indexes which went up by 0.22% and 0.09% respectively,
Market breadth remained positive as advancers outnumbered decliners in the ratio of 24:10, while market activities were down in volume and value traded by 32.21% and 53.34% respectively to 267.31m shares worth N3.05bn, from previous day’s 394.35m units valued at N6.54bn. This volume was driven by transactions in leading banking stocks like Access Bank, UBA, Zenith Bank, FBNH and Guaranty Trust Bank.
The best-performing stocks for the session were Chams and Learn Africa, topping the advancers table, after gaining 10% and 9.48% respectively to close at N0.33 and N1.27 each, on the back of market forces and their low price attraction. On the flip side, National Salt and Lasaco Assurance lost 5.72% and 3.57% respectively, closing at N14.00 and N0.27 on profit-taking.

Market Outlook
We expect the mixed trend to continue on a capital wave, profit-taking and repositioning in value stocks as market players digest the rising inflation and its impacts on investment returns. The changing sentiments in expectation of improved liquidity as interest rates drop in the money market ahead of the MPC meeting should guide investors. The current undervalued state of the market 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 NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future, and another fiscal policy initiative that may provide liquidity for the economy and market.

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