Cautious Trading Continues, As Investors Await October Inflation, Q3 GDP Data For Hints

Market Update for November 13

The nation’s stock market on Monday had a seemingly good session to start the week very volatile, reacting to the last weekend’s downgrade of eight Nigerian banks due to risk exposure resulting from their high Non-Performing Loan (NPL), an aftermath of the earlier downgrade of the sovereign, knowing that every company’s output or performance is a function of the operating environment. As such a company or sector cannot outperform its sovereign. The financial sector of the economy in recent years have been resilient despite the economic situation, especially given where the economy is coming, especially since the 2014 pre-election year.

It is important to also note that since the onset of the current financial year, some of the banks had posted strong earnings and robust balance sheets, while others have shown some decline in customer deposits, a situation that is not too good, especially when such has persisted for two consecutive quarters in the case of one or two of the downgraded banks, while some reported flat deposits, a factor that is very key to loan disbursements.
The major index broke down the recent strong support level before rebounding to close higher, although the NSE All-Share Index pattern was mixed rather than solid, even as market technicals were unimpressive. Trading started with the index running down in the morning, and thereafter retraced to test intraday high of 37,314.36 by the afternoon from a breakout on Friday after touching low of 36,843.04.

Experience has shown that markets don’t go in a straight line, as there are corrections along the way, one of which occurred in September and any one coming ahead should be taken as part of the year-end seasonal changes.
Meanwhile, the market eagerly awaits the outcome of MSCI Frontier market Index review.
Buying pressure remain high as revealed by volume index of 0.76 with buy position of 100% and sell of 0% , while total transactions for the day continued the two-day bull transition on the strength of high volume transacted in the shares of Dangote Cement.

Meanwhile, the composite index NSEASI gained 192.00 basis points to close at 37,312.23 from 37,120.28 points it opened, which represented a 0.52% growth, same as market capitalization, which climbed N218.73bn up to N12.91tr, representing 0.52% value gain in value from previous N12.85tr.
The upturn in the share price of medium and high cap stocks like Dangote Cement, Forte Oil, Okomu Oil and Guinness Nigeria impacted positively on the ASI’s year-to-date return, as it moved to 38.84%, just as YTD growth in market capitalisation stood at N3.67tr, representing a 39.65% rise above the year’s opening value.
Market breadth on Monday was negative as the number of decliners outnumbered advancers in the ratio of 24:16 on a high traded volume that was higher than previous day’s level to keep the bull running.

Market activities in terms of volume and value were up by 91.90% and 1032.83% respectively as 336.34m shares changed hands for N30.02bn from the previous day’s 175.27bn units, worth N2.65bn.
Transactions in the shares of Dangote Cement topped the volume chart as investors crossed 128,922,588 units, representing 0.75% of its shares in issue at N27.082bn in just 672 deals. Top volume transactions were also recorded in the shares of FBNH, Fidelity Bank, Diamond Bank and Guinness.

At the end of the day’s trading session also, Forte Oil topped the advancers’ chart, gaining 8.78% to close at N47.97 per share, on market sentiment and improved Q3 numbers; followed by Okomu Oil with 4.66% notch, to close at N67.99 on market forces and impressive Q3 numbers.
On the flipside, C&I Leasing shed 4.79% to close at N1.59 on profit taking and the proposed share reconstruction; followed by Caverton with 4.76% loss, to close at N1.60 per unit on profit taking.

TODAY’S OUTLOOK
Monday’s market was weak and down, until help came from Dangote cement. We expect volatility to continue in reactions to the downgrading of eight banks, along with portfolio rebalancing, as well as profit taking and repositioning ahead of the MSCI Index review outcome and October inflation figure from NBS.

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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