AHEAD OF NEXT MPC MEETING, NIGERIA’S Q3 GDP NEWS, INVESTORS NEUTRAL ON OCT. INFLATION DATA

Market Update for November 15

The mid-week trading activities on the Nigeria Stock Exchange was very volatile irrespective of the another positive economic data that revealed another slow decline in inflation rate for the month of October, even as investors keep their eyes trained on next week’s two-day meeting of members of the Central Bank of Nigeria’s Monetary Policy Committee (MPC), which begins on Monday.

Inflation in the month of October, according to data from the National Bureau of Statistics (NBS) on Wednesday morning stood at 15.91% (READ).

Also very important and the thought of which would keep investors and analysts guessing in the coming days, is the much awaited third quarter Gross Domestic Products (GDP) numbers, scheduled for release also by the NBS on Monday, November 20, 2017. The figure would also be key to the decisions of the MPC members at their meeting, the last for the year.

All of these factors may account for the negative performance of the Nigerian Stock market as equities continued their free fall on Wednesday with noticeable increased selling pressure, especially in the four stocks that were demoted to the small cap segment and those delisted from the recently reviewed MSCI (Morgan Stanley Capital Index) Frontier Markets Index released on Monday (READ).

The situation was made worse by the downgrade of banking stocks, just like the sovereign by Moody’s, following which market correction was not unexpected, even as we expect that it would not last long, due to the low valuation of Nigerian stocks, added to the general improvements in corporate earnings on the NSE that would support higher payout at the end of the year.

Trading opened for the day with little sliding down, which continued until it reach lower-lows through the midday to afternoon before rallying back marginally at the final minutes to close lower than it opened. The index picked up near support as it broke down the 20-day moving average and the rising channel due to losses recorded by highly capitalized stocks at the end of the day.

Stepping back and reviewing the hourly chart patterns, the opening plunge for the first ten minutes got the indices to their lows for the day. An afternoon rally attempt fell short of the old highs, and it came down really hard. It was another day in the downtrend that recently developed. This is the second day that we’ve been in a downtrend, and the first support has been taken out as well.

Selling pressure on Wednesday was high at 86%, but lower than the previous day’s 92%. Volume index for the day was 0.71 and buy position- 14% out of the total transactions for the day to continue two-day bear transition on a low volume traded that signaled an end of the trend is in sight, depending however on the market direction at the end of today trading.

Meanwhile, the All Share Index shed 335.9 basis points to close at 36,617.45 from 36,953.41 points it opened, which represented a 0.91% decline, similarly, market capitalisation was down by N116.28bn to N12.67tr from previous N12.79tr.

The down market continued due to price depreciation in low, medium and high cap stocks like Unilever, NB, Dangote Cement, FBNH, PZ, Dangote Sugar, Dangote Flour, 7UP and Access Bank, which was enough to reduce the ASI’s year-to-date return to 36.25%, just as YTD growth in market capitalisation stood at N3.43tr, representing a 37.05% rise above the year’s opening value.

Market breadth remained negative as the number of decliners outweighed advancers in the ratio of 26:15 on a low traded volume that was lower than previous day’s level.

Market activities in terms of volume and value were down by 22.70% and 2.92% respectively to 184.25m shares valued at N3.32 billion from the previous day’s 238.36 million units, worth N3.42bn.

Transactions in the shares of FBNH, Zenith Bank, Fidelity Bank, Diamond Bank and UBA topped the volume chart.

At the end of the trading session, AG Leventis topped the advancers’ chart, gaining 8.47% to close at N0.64 per share, on market forces, followed by Red Star Express which notched 5% to close at N5.04 on market forces also, besides its impressive Q2 numbers and ahead of its rights issue.

On the flipside, C & I Leasing shed a further 8.97% to close at N1.32 on profit taking and apparent investor reaction to its proposed share reconstruction and primary activity. It was followed by PZ Cussons, which was deleted from the MSCI Frontier Markets list, which lost 8.93% to close at N20.40 each.

TODAY’S OUTLOOK

On the strength of market reaction to Moody’s and MSCI Index review, expect volatility to continue, just as selling pressure reduces amidst portfolio rebalancing, profit taking and repositioning, helped by the inflow of more positive economic data into the market, while investors continue to digest the implications of those already released and the implications for the market and the economy at large.

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 moving up and down amidst improving company, economic and market fundamentals.

It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

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