Year-End Outlook: Volatility, Profit Taking, As Investors Realign Portfolios

Market Update for Week Ended November 24 and Outlook for Nov 27-Dec 1

Nigeria’s stock exchange over the past week continued on its volatility path, even as it reversed previous week’s down market on the strength of investors and traders taking advantage of last week’s Monetary Policy Committee (MPC) meeting outcome, which induced a pullback. It was not just the outcome of the MPC meeting alone, as investors and traders interpreted it along with other positive economic data such as the Q3 GDP and inflation data, as well as the Purchasing Managers’ Index to position in fundamentally sound equities, especially blue-chip stocks like Dangote Cement, which recently expanded its foot-hold on the continent, with the opening of its latest plant in Congo Democratic Republic; and Nestle Nigeria that continues to bask on the robust market disposition, helped by the juicy interim dividend of N15 per share, just as its improved earnings capacity remains a support base for its price and dividend to hit a new all-time high.
The market during the week recorded a mixed performance, closing higher on strong technicals and good buying pressure that reflect demand for stocks, hitting a recent resistance level on a weekly high of 37,374.88 after breaking out the psychological line of 37,000 point again from the low of 36,563.48 basis points. At the same time, the index formed a symmetrical triangle chart pattern that supports continuation or reversal of current trend with end of month and year round the corner. Market breadth was positive as volume index for the period stood at 1.29, with buying pressure of 99% and 1% selling position of the total transaction, amidst repositioning on the part of traders after Moody’s downgrade of both the sovereign and banking stocks; coming after the reclassification of most Nigerian stocks on the MSCI Frontier Index, and the decision of the MPC to hold its benchmark Monetary Policy Rate (MPR) at 14%, while retaining others on the argument that the recent improvements in the GDP remains fragile, when considered against the nation’s population growth rate.
Investdata Research maintains its long held opinion that there is need for a holistic approach to quickening the growth of Nigeria’s economy, which must involve the monetary and fiscal authorities to boost productivity, achieve and sustain meaningful growth.
The composite NSE All-Share index for the week gained 662.33 points to close at 37,365.91 points, from an opening figure of 36,703.58 points, representing a 1.80% growth on a higher volume of transactions that were driven by financial services and consumer goods.
Market capitalisation for the period closed higher at N13.01tr from the opening value of N12.77tr, representing a 1.84% value gained in investor portfolios, with low and medium cap stocks dominating the advancers’ log as a result of their high upside potentials and low price attraction, considering impressive numbers of quoted companies.
The upturn recorded for the period were due to price appreciation in the low, medium and high stocks that impacted positively on the NSE ASI’s year-to-date return to 39.04%, just as market capitalisation for the period increased to N3.76tr, representing a 40.69% gain from the year’s opening value.
Market breadth for the week was positive with advancers’ outnumbering decliners in the ratio of 36:24 on a high volume of trades that is marginally lower than previous week’s.
It was a big and mixed week for markets around the world as U.S equities rose on investors expected increase in shopping activities as households celebrated Black Friday, whereas in Europe markets closed lower on the lingering political uncertainty and lower liquidity levels due to the thanksgiving holiday. Asia markets were mixed to close the period as investors look to position with Chinese stocks, ahead of the November 30th meeting of the Organisation of Petroleum Exporting Countries (OPEC) to determine whether to sustain the supply level, or further cut output that would further drive oil prices higher, with oil price hitting $64 to close on Friday at $63.7 from the previous day $63.4.
Trading on the NSE for the week started on a positive note as the market reacted to the better-than-expected Q3 GDP growth of 1.4% released same day to consolidate the previous trading session’s up market by gaining 0.24%. This was short-lived as the loss in Tuesday’s trading session wiped out the previous gains, as the index shed 0.52%, after which midweek’s trading session closed by a marginal 0.02% gain to signal an uptrend that was sustained on Thursday, just the following day with the index gaining 0.22% and 1.85% respectively to close the week higher than its opening with 1.80% gain.
The All Share Index and sectoral indices closed higher for the period, except for the NSE Oil/Gas that was lower by 1.45% while NSE ASeM closed flat for the week.
Market transaction for the week in terms of volume and value were down by 22.14% and 58.38% respectively at 2.18bn shares worth N22.8bn, from the previous week’s 2.8bn units valued at N54.78bn.
The best performing stock for the period was Dangote Sugar, which hit a new 52-week high, after gaining 20.31% to close at N17.24, while Linkage Assurance recorded a rebound after the previous week’s sell-off to close at N0.64, gaining 14.29% to top the advancers table on the strength of low price attraction and market forces.
The worst performing equity for the period was Forte Oil which lost 17.73%, closing at N40.00 on market reaction to its exit from the MSCI frontier Market index and profit booking, while GSK followed with a 9.70% drop to close at N22.80 per share on profit taking and its unimpressive Q3 numbers.
During the week also, Lafarge Africa listed additional shares of 85,261,220 units as a result of its capital re-organisation with Ashaka Cement; while FCMB and Nigerian Enamelware released their Q3 and Q2 earnings reports respectively.

Market Outlook
This week, expect a continuation of the volatility, being the trading week for the month of November and the mark down of Nestle Nigeria for the N15 dividend, OPEC meeting and the last trading week of the month amidst portfolio reshuffling as seasonal changes influence stock prices amidst the volley of positive economic data. Expect traders to also take advantage of volatility and strong Q3 numbers for repositioning and rebalancing their positions. There is also the effect of the reshuffling of stocks on the MSCI Frontier Index at this time.
But one thing that is clear in the current market situation is: Smart investors are accumulating and enhancing their positions in selected stocks.
Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year trading activities, especially now that prices of stocks are oscillating amidst improving economic and market fundamentals.
It is time to use your technical tools to take decision by knowing the support and resistant level to reposition or exit any position.
Investing in the stock market is in phases. You must know this in order to manage your trading and investment risk. For stocks that should be on your shopping list to buy in this end of the year and ahead of 2018 full year earnings season, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467 or text Signal.
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