Speculations Still On NGSE, Ahead Of MPC Outcome, Oct Inflation Report

Market Update for November 15

Trading activities on the Nigerian Stock Exchange on Thursday was negative to consolidate the bearish transition which broke down 32,000 the psychological line after retesting the 31,949.40 basis points strong support level twice, before finally giving up on selloffs in premium stocks.
It was a volatile session indeed, as the corrective wave extended below the recent support level to make lower lows on high volume traded and negative breadth that prolonged the down trend experienced so far in the year. The massive spikes to new 52-week low and stocks hitting oversold condition can lead to temporary reversal or rally any moment from now. But more importantly, there are signs of further decline which will be a function of market reactions to the decisions reached at next week’s two-day meeting of the Central Bank of Nigeria’s Monetary Policy Committee and expected economic data.
The continued decline continues to offer higher possibility that the market and stock could rebound from their lows in the nearest future. That does not in any way mean that the down trend has changed just yet.
History however suggests that we most likely need to see a retest or overshoot of lows and strong market breadth improvement as a sign that the market has started the process of fixing itself after the huge losses and corrections.
Market technicalsfor the day were negative and mixed amidst the high volume traded; negative market breadth and strong selling sentiment as revealed by Investdata’s Daily Sentiment Report, which shows a sell position of 98% and 2% buy volume. The volume index for the day’s total transactions was 1.56, meanwhile the momentum behind the market performance was weaken, going by the decrease in Money flow index to 51.57bps, from previous day’s 60.84ps, indicating that funds are leaving the market and some stocks.

Index and Market Cap
At the end of Thursday’s trading, the NSE All Share index shed 244.12bps, at 31,854.80bps, having opened at 32,108.92bps, representing 0.76% decline, just as market capitalisation lost N89.1bn, at N11.63tr from an opening value of N11.72tr, representing a 0.76% value loss.

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Thursday’s downturn was impacted by loses suffered by highly capitalized stocks like Guaranty Trust Bank, Zenith Bank, UACN, International Breweries, Access Bank and Transcorp. This impacted negatively on Year-to-Date returns, extending it to 16.68%, while market capitalization decline rose to N1.98tr from its opening level in January, representing 14.52% drop.

Bearish Sectors Indices
Sectorial performance was largely bearish, except for the NSE Insurance and Consumer goods that closed marginally green. Market breadth was negative with decliners outpacing advancers in the ratio of 21:10.
Market activities were up in volume and value by 52.4% and 1.8% respectively to 349.25m shares worth N2.45bn, from previous day’s 229.26m units valued at N2.39bn.
Transaction volume was boosted by financial services stocks like: Diamond Bank, FCMB, Stanbic IBTC, UBA and Guaranty Trust Bank.
Jaiz Bank and Japaul Oil were the best performing stocks, leading the advancers’ table, after gaining 7.5% and 5% respectively to close at N0.43 and N0.21 each on market forces.
On the flip side, Meyer and Uacn Property lost 10% each to close at N0.54 and N1.44 respectively, on market trend and weak earnings.

Market Outlook
With equity prices becoming cheaper, oscillating trend will continue as traders speculate ahead of the release of October inflation report and outcome of MPC meeting given that there is no new incentive for the market in November, until there is a change in the narrative. Going by the timetable of the National Bureau of Statistics (NBS) released earlier in the year, the nation’s Q3 Gross Domestic Product (GDP) report is slated for release on Tuesday, November 27, same date as the Q3 capital importation report.
The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of the expected Q3 GDP and full year company earnings position. These are likely to drive prices north, or south, while determining market direction before or after Presidential Election.
Investors should review their positions in line with investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,

We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.

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