Market Update for the Week Ended November 20 and Outlook for Nov 23-27
Profit booking dominated trading on Nigeria’s equity market last week after nine successive weeks of uptrend driven by a high level of liquidity, positive sentiments, low yield in the fixed income space, and the better-than-expected corporate earnings in a struggling economy. The slowdown in market resulted from investors cashing out the recent gains from the unprecedented rally.
There were the seemingly lower-than-expected 2020Q3 score-cards from tier-1 banks, perhaps due to the high hopes, just as analysts are already looking at the expected outcome of the Central Bank of Nigeria (CBN) Monetary Policy Committee meeting, the last for this year, and the implications.
Nevertheless, the pullbacks have created room for repositioning ahead of December seasonal trends and New Year corporate action at the peak of the earnings reporting season for the December year-end accounts in the first quarter of 2021.
The macroeconomic indices emanating from the CBN and the National Bureau of Statistics (NBS) in the week under review showed a mixed performance with inflation rate spiking further in October hitting a 14-month high to 14.23%, from 13.71% in September, representing a 52bps uptick YoY. This is a direct impact of government policy, especially the recent hike in the pump price of premium motor spirit (petrol). This has been worsened over time by the heightened insecurity across the country that has grossly affected farmers, resulting food inflation.
Meanwhile, the Purchasing Managers Index rose to 50.2 points in November, up from 49.6pts in the prior month, indicating an expansion in national industrial output after six months of contraction.
At the weekend, the NBS presented the 2020Q3 GDP figure, showing a second quarter-on-quarter contraction of 3.62%, officially confirming what many have predicted about the nation entering into a recession, after the negative Q2 GDP of 6.1%. We must however admit that the contraction came far better than was envisaged, just as it represents an improvement from the previous quarter, as the economy began to open after months of lockdown across the globe to check the spread of the Coronavirus pandemic that has ravaged the several country. It is noteworthy that during the lockdown, that Nigeria could not earn revenue from its mainstay- crude oil, with manufacturing activities at its ebb.
In all of these reports, there are also improvements in economic fundamentals and activities in face of coronavirus effects and others. For the positive move in PMI and GDP to be maintained, Investdata believes that the time has come for government and its economic managers to revisit some of its policies and make adjustments, because it is now obvious that the country is plagued by a food crisis, in the absence of preparation or plan.
We believe the time has come for forward thinking, because the soaring inflation rate is a threat to the entire economy and investment.
Movement Of NSEASI
Trading activities for the week was bearish as the benchmark index closed on a negative note as investors took profit, trading below the shortest (seven-day) moving average at the end of the week. The market had four sessions of losses and a single day gain on a very high traded volume and selling pressure to close the first trading day of the week on a bearish note, losing 0.75%, a trend that was extended to Tuesday when the composite NSE All-Share index lost 1.53% on continued profit booking. This was however halted at the midweek, with the index closing 1.7% up on renewed buying interests that was short-lived on Thursday and Friday, when the index lost 0.50% and 1.47% respectively. This was due to negative sentiments and reactions to the long awaited banking results, bringing the week’s cumulative loss to 2.57%, compred to the previous week’s 12.97% gain.
Consequently, the key performance index close lower at 34,136.68 basis points after opening at the week at 35,037.46bps and touching an intra-week low of 34,064.25bps, from the high of 35,245.62bps, due to high selling pressure witnessed during the period. Market capitalization lost N470.61bn, closing at N17.84tr, from the previous weekend’s N18.31tr, representing a 2.57% value loss.
During the week, 14 companies released their quarterly scorecards, 11 of which were Q3 earnings from Access Bank, Guaranty Trust Bank; Zenith Bank, UBA, FBNH, and Sterling Bank among others; while Q2 numbers came from University Press and ABC Transport.
During the period also, Neimeth Pharmaceuticals presented its unaudited 2020 full-year result, just as the share prices of Cutix and Seplat were adjusted for dividend of N0.125 and N19.29 per share as recommended by their directors. AIICO Insurance announced a bonus share of one new for every five as of November 30, 2020.
The week’s advancers’ table reflected the depressed market during the period, while the negative breadth showed selloffs with decliners outnumbering gainers in the ratio of 55:21, and mixed momentum as the Money Flow Index remained at 100bps, for fifth consecutive week.
NSEASI WEEKLY CHART MOVEMENT
The NSE’s index action pulled back on a high traded volume and selling sentiment, despite the submission of the long awaited Q3 results from banks in the midst of profit booking and the low yields in the fixed income space ahead of Monday’s MPC meeting. This trend may likely be reversed, depending on the outcome of the CBN MPC meeting. For now, the index has broken down the 35,000 psychological line.
The market recovery moves and bullish trend remained intact during the week, with the index still trading above the 50 and 100-Day Moving Average on a high traded volume. The strong support level to watch out is 32,958.96bps, given that the current pullbacks have created a buy opportunity for long term investors.
However, we envisage a mixed trend in the midst of profit-taking, as players’ digest the recently released scorecards from banks vis-à-vis emerging economic data released within the period, given that MACD remains in the bullish zone. The sell volume for the period stood at 94% and buy position of 6%, with total transaction index at 1.95.
Bearish Sectoral Indices
All the sectoral performance indexes were bearish, except for the NSE Insurance that closed 0.51% up, while the NSE Banking led the decliners, after shedding 5.98%, followed by the Oil/Gas that closed 4.38% lower, while the Consumer and Industrial Goods lost 4.29%, and 0.66% respectively.
The general market outlook remains mixed in the short-term, following which investors should take short and medium-term positions, while diversifying their portfolios along long-term trades to protect capital. This, they can do, by considering sectors with high upside potentials on the strength of earnings and policy influence. The recent market rally calls for caution as numbers from some companies and sectors were mixed as should be expected, given the negative impact of the COVID-19 pandemic and the EndSARS protest on full-year results, as forecast by the macroeconomic indices.
Activities in volume and value terms were mixed, with investors exchanging 11.40bn shares, up from the previous week 4.51bn units, representing 152.77% increase, while transaction value fell by 38.89% to N35.89bn, from the previous N58.73bn. Volume was driven by transactions in UACN Property, Transcorp, Jaiz Bank, Zenith Bank and FBNH.
The best performing stocks during the week were BOC Gas and Tripple Gee, which appreciated by 39.88% and 19.57% respectively, closing at N6.77 and N0.55 each on positive sentiment and market forces. On the flip side, Coronation Insurance and Oando lost 21.15% and 19.75% respectively, at N0.41 and N3.21 per share on market forces and profit taking.
Market Outlook
Given the persisting bull-run, profit taking is evitable, being a regular behaviour of stock markets. Any price correction at this phase of market recovery will support the upside potential, especially with many fundamentally sound stocks remaining underpriced, and the dividend yield of major blue-chips continuing to look attractive, despite the recent weeks’ rally.
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Take Action
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2020 Review & 2021 Stock Market Ride: Where to Shop for Profit in Any Market Condition (AlhajiGarbaKurfi MD/CEO APT Securities & Funds Ltd)
Volatility: How to use Resistance and Support for Profitable Trading in 2021 and beyond (Mr. AbdulRasheed Momoh Head Capital Market Trw Stockbrokers Ltd).
2021 Budget and Oscillating Crude Oil Prices: Implication for the Nigerian Economy and Stock Market (MrAbiolaRasaq, CSCS).
Changing Investment Climate and Monetary Policy: How to take position (Mr. Jibril Muhammed Bello, Head Capital Market Newdevco Investment & Securities).
Effect Of The CBN Monetary Easing Policy On The Stock Market In 2021 (Engr. Mike Ekwueme MD, X-Front Trader Ltd
Investment Strategies for Assets and Portfolio Realignment in 2021 & Beyond (Mr. AdeboyeTeriba, Head, Trading Nova MBL Securities Ltd
Dividend Investing For Juicy Returns In Post COVID-19 And Low Yields Regime. (Mr. Ambrose Omordion CRO Investdata Consulting Ltd)
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Alternative Asset Classes to diversify your portfolio
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How to ride on dividend payout in a post-COVID recovery move
10 Golden Stocks to buy immediately after the summit
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08032055467
