NGSE: Ongoing Corrections Offer ‘Buy’ Opportunities, As Mixed Trends Continue

Market Update for December 3

Again, Nigeria’s equity market suffered marginal losses on Thursday to continue pullbacks as traders took profit from the earlier rally, thereby extending the composite index decline for the second consecutive session on a low traded volume and negative sentiments.

The trading pattern this week has revealed mixed trend and accumulation in some particular sectors and individual stocks that were trading low in the morning, only to close higher, or flat at the end of the session. This is a sign of smart money coming to markup prices after accumulation. However, let us await confirmation next week.

We have mentioned earlier in our outlook for this last month of year that there will be mixed trend of bull-run and profit taking in the midst of expected seasonal trends and window dressing.

The prevailing negative sentiment on the Nigerian Stock Exchange (NSE) for two days, so far, is to be expected, even as market fundamentals remain strong, a sign, in our opinion, that the market is waiting for another trigger in the form of information or statements such as a policy adjustment by the Central Bank of Nigeria (CBN) capable of providing more liquidity and stable exchange rate to further impact the market positively.

We therefore advise players to explore the recently released Q3 numbers to guide their investment decisions, while positioning against 2020 full year audited results and corporate actions in 2021.

Thursday’s trading opened in the green and vacillated throughout on profit booking and buying interests in some stocks, which pushed the benchmark index to an intraday low of 34,952.99 basis points, from its high of 35,195.09bps. The day closed lower with the index below the 35,000 psychological line at 34,968.94bps.

Market technicals were negative and weak, with lower volume traded when compared to the previous day in the midst of negative breadth and sentiment as revealed by Investdata’s Sentiment Report showing 93% ‘sell’ volume and 7% buy position. Total transaction volume index stood at 0.58 points, just as the energy behind the day’s performance was relatively weak with the Money flow index looking down and below 50 points at 49.45pts, from the previous day’s 60.55pts, an indication that funds left the market due to the continue profit taking. 

Index and Market Caps

At the close of Thursday’s trading, the All-Share index lost 87.88bps, closing at 34,968.94bps, representing a 0.25% decline, after opening at 35,056.82bps; just as market capitalization fell by N45.93bn to N18.28tr, after opening at N18.32 trillion, which also represented 0.25% depreciation in value.

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The downtrend resulted from profit taking in stocks likes Guaranty Trust Bank, Zenith Bank, Flour Mills, UBA, NEM, Flourmills, Guinness, and Cadbury, among others. This dragged Year-To-Date gain down marginally to 30.28%, while Market capitalization YTD gain stood at N5.32tr, representing a 41.04% growth above the opening value.

Bearish Sector Indices

Sectoral performance indexes were bearish, except for the NSE Industrial Goods that closed flat, while NSE Banking led the decliners, shedding 2.07%, followed by the NSE Consumer, Insurance and Oil/Gas that were down by 0.91%, 0.82% and 0.35% respectively.

Market breadth was negative, as decliners outnumbered advancers in the ratio of 25:13, while activities in volume and value terms were mixed, and volume traded down by 21.83%, as stockbrokers crossed 289.39m shares from the previous day’s 368.91m units, while value traded rose by 33.88% to N7.35bn from midweek’s N5.49bn. Volume was driven by trades in UBA, Zenith Bank, MTNN, Access Bank and Mutual Benefits Assurance.

Mutual Benefits Assurance and Royal Exchange Assurance were the best performing stocks, gaining 9.52% and 9.09% respectively at N0.23 and N0.24 per share on the back of market forces. On the flip side, Unity Bank and Chams lost 9.86% and 8.00% respectively at N0.64 and N0.23 per share,also on profit-taking and market forces.

Market Outlook

Being the last trading day of the week, we expect a mixed trend to continue in the midst of slight improvement in Treasury bills rates, profit taking, portfolio rebalancing and repositioning in the new month, just as the market awaits inflow of funds from alternative investment and adjustment in CBN policies. Behind this correction lies buy opportunities for discerning traders and investors.

Also important is the fact that technical indicators reveal overbought on the weekly and daily chart, while RSI reads 70 points and above, a situation that supports the likelihood of another correction.

However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by the quality of Q3 earnings 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 sectoral 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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CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467

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