Market Update for November 13
Midweek’s trading on Nigeria’s stock market closed lower, short-living the two trading sessions of bull run as profit booking and selloffs resurfaced again, dragging the composite Nigerian Stock Exchange All Share index down on a huge traded volume that sent mixed signals to investors.
In a related development, the crash in Nigeria Treasury bill rate at Wednesday’s trading session to its lowest in three years is good news for equity investors, manufacturing companies and the general economy. This, immediately, implies that the cost and flow of funds will change. Already, local fund managers have moved into the nation Treasury Bills auction conducted at the midweek, after being locked out of the Open Market Operations (OMO) by the Central Bank of Nigeria (CBN) like other domestic non-bank investors.
The primary market auction-rate dropped by 150 basis points, compared to last October’s auction. This is the first time 91-day bills and the 182 days, the shortest and mid-dated instruments respectively, would be offered at single-digit rates of 7.8% and 9% respectively, since June 15, 2016. Also, the rate on long-dated 364 days bills stood at 10%.
This recent drop in TBs and other money market instrument rates will boost purchasing power, if this interest rate level is maintained, going forward, as it would help trigger productivity and economic growth, at a time the fiscal authorities are expected to focus on infrastructural development and less on politics at different levels of government.
Like we mentioned in our update for Tuesday, you would notice that TB and other rates have crashed below the September inflation rate of 11.24%, making the equity market more attractive now for discerning traders and investors.
Meanwhile, midweek trading on the equity market opened on the downside, and was sustained throughout the session, despite the seeming oscillation between midday and afternoon, as selloffs and profit-taking resurfaced. This pulled the index to an intraday low of 26,338.25bps, from its high of 26,456.39bps, before retracing up slightly to close the day lower at 26,339.11bps.
The session technicals were negative and mixed, with higher volume traded than the previous day, while breadth favoured the bears and sentiment was negative, as revealed by Investdata’s reports showing a ‘sell’ volume of 84% and ‘buy’ position of 16%. The day’s Transaction Volume Index stood at 2.22, while the energy behind the day’s performance pulled back, with Money Flow Index reading 47.07 points, from the previous session’s 51.66bps. This is an indication that funds left some stocks and the market, as selloffs and profit booking emerged.
Index and Market Cap
The All-Share Index at the end of Wednesday’s trading shed 117.28points to close at 26,339.11bps from its 26,456.39bps opening, which represented a 0.44% decline, just as market capitalization lost N57.09bn, closing at N12.82tr from an opening value of N12.88tr, which also represented a 0.44% depreciation in value.
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The day’s decline was due to investors cashing out profit and selloffs in stocks like Dangote Cement, Guaranty Trust Bank, Lafarge Africa, CCNN, Total Nigeria, Unilever, PZ Cussons Nigeria, Oando, UBA, Eterna, FCMB and Honeywell. These impacted negatively on the NSE’s Year-to-Date loss, which increased to 16.20%, while slicing market capitalization gain down to N1.15tr, representing 9.38% up from the year’s opening value of N11.72tr.
Bearish Sector Indices
All sectoral performance indexes for the day closed lower, except for the NSE Banking index which stayed marginally green at 0.11%, while the NSE Oil/Gas index led the decliners, after losing 1.43%, followed by NSE Insurance with 1.01%. The NSE Industrial and Consumer Goods slipped 0.95% and 0.40% lower respectively.
Market breadth turned negative as decliners outpaced advancers in the ratio of 15:13, while market activities rose in volume and value traded by 61.38% and 55.31% respectively to 610.58m shares, worth N11.1bn from the previous day 378.35m units valued at N7.15bn. The day’s volume was driven by transactions in Zenith Bank, Access Bank, Nigerian Breweries, Guaranty Trust Bank and UBA.
The best-performing stocks for the day were Ikeja Hotels and AG Leventis, topping the advancers table, after gaining 9.09% and 7.14% respectively to close at N0.96 and N0.30 each, on the back market forces and November 14, being the qualification date for the split buy over price of 0.53 kobo respectively. On the flip side, Total Nigeria and PZ lost 9.98% and 9.91% respectively, closing at N110.90 and N5.00 on unimpressive earnings and market forces
Market Outlook
We expect stocks to continue wobbling on the back of value investing, profit-taking and selloffs as market players digest the Q3 scorecards and align their portfolios along those with impressive numbers, in expectation of improved liquidity as interest rate in the money market is crashing ahead of October inflation reports and MPC meeting in a fortnight. The recent 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 NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future. And other fiscal policy initiatives that may provide liquidity for the economy and market.
Take Action
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
