MARKET UPDATE FOR WEEK ENDED NOVEMBER 3, AND OUTLOOK FOR NOV 6-10

MORE VOLATILITY AHEAD, AMIDST PORTFOLIO REBALANCING, AS INVESTORS DIGEST EARNINGS, ECONOMIC DATA

Trading activities on the Nigeria Stock Exchange over the past week was up as the earnings reporting season officially came to a close with many companies rushing to release their scorecards, many of which beat market expectations thereby triggering demand for such stocks as traders and investors reacted by rebalancing their portfolios ahead of the year end. There is the factor of a minor rebalancing of the MSCI (Morgan Stanley Capital Index) Frontier index to be released on November 13, besides other economic data, even as positive macro-economic indices continue to pure in, supporting to support the economic recovery narrative. Some of such economic data include the recently released October Purchasing Managers Index released by the Central Bank of Nigeria (CBN), which stood at 55 points from 55.3 points in September, while that by the private sector (NOIPoll) were 64.8 points from 58.5 points respectively, indicating that growth and expansion in the manufacturing sector remained above 50 points for seven consecutive months.  

The performance of stocks continues to reflect the nation’s improving economic and market fundamentals that further boosted confidence resulting in stronger companies, especially just as purchasing power among consumers becomes further strengthened resulting in a situation where manufactured goods are not lying as unsold stock in warehouses and shelves. No wonder then, that 75% of listed companies reported very good numbers that beat market and analysts’ earnings estimates. Added to this are the strong commodity prices, particularly oil, Nigeria’s mainstay and major income earner, thereby boosting government revenue and the nation’s external reserve. All that is needed now is a huge fiscal stimulus by way of government’s budget spending for the economy to make stronger impact on the populace if judiciously implemented.

Market technicals for the week under review were positive on the strength of strong market breadth and impressive corporate earnings that drove the momentum and reversed the two weeks of down market to close the week higher, even as some stocks hit new 52-week high.  The week also closed on ‘buy’ pressure that is supposed to influence activities positively in this new week as interpretation and digestion of the recent numbers continue to drive repositioning along the best performance sectors and stocks ahead of year-end and seasonal changes.

The weekly volume index was 1.48, buying position, 99% and 1% selling volume of the total transaction, as traders  continue to position for end of year volatility and changes.

The composite NSE Index gained 477.33 points to close the week at 36,939.59 points, from an opening figure of 36,462.26 points, representing a 1.31% growth on a higher volume of transactions. The index touched intra-week high of 37,009.45 and low of 36,144.64 basis points. There was a resistant at 36,734.39 as demand for stocks increased and traders cashed out gains. Market capitalisation for the period closed higher at N12.79tr from the opening value of N12.67tr, representing 1.31% value gain in the investors’ position.

High, medium and low cap stocks featured on the advancers’ log for the week as value investing in the line of better-than-expected earnings reports influenced market players’ positioning with the close of earnings season.

Strong number-inspired confidence increased demand for stocks and a stronger market that impacted positively on the NSE ASI’s year-to-date return to 37.45%, just as market capitalisation for the period increased to N3.54tr, representing a 38.26% gain from the year’s opening value. Market breadth was positive with advancers outnumbering decliners in the ratio of 37:29 on a high volume of trades. It was however slightly lower than the volume transacted in the previous week.

Stock markets around the world were higher over the week, as companies and consumers emerged stronger, amidst the rising commodities, currencies and interest rates to reflect improvements in the global economy.

Germany‘s DAX, Japan’s Nikkei, Britain’s FTSE100 joined the U.S. market to close higher. Growth in the U.S. market indexes was driven north by strong tech earnings and the decision of the Fed to keep rates steady at the range of 100-125 basis points, despite the payroll farm figure that came lower than expected. In Europe, inflation figure came in lower than expected at 1.4% even as the Bank of England (BOE) hiked rate for the first time in 10 years. In Asia, Japanese Prime Minister Shinzo Abe is positioning a planned increase in sales tax to cover the rising debt even when the last hike in 2014 triggered a recession in the world’s third largest economy.

Back home, the All share Index started the week on positive note with gain of 0.06%, which was sustained on the second and third trading sessions with index moving up by 0.47% and 0.59% respectively. The trend was however reversed on Thursday when the indicators closed marginally negative with 0.03%, which was short lived on Friday, when it notched 0.17%, helping the week to 1.31% closer higher thereby halt two previous weeks of down market.

The NSE and sectoral indices closed higher for the week, except for the NSE Main Board and NSE Consumer Goods that closed lower by 0.11% and 0.07% respectively.

Transaction for the week, measured by aggregate volume and value, were mixed as volume dropped by marginal 2.16% to 1.36bn, from 1.39bn shares in the previous week, while value was slightly up by 7.99% to N17.71bn, compared to the previous N16.4bn.

University Press topped the advancers’ table, gaining 26.34% to close at N2.59 per share on the low price attraction and improved Q2 numbers, followed by Learn Africa with 19.05% to  close at N1.00 each on  market forces.

The decliners’ table on the other hand was led by Newrest ASL, which lost 18.30% at N6.43 on market forces and unimpressive Q3 numbers, while Linkage Assurance followed with 13.33% drop to close at N0.78 per share on market forces.

During the week also, more than 40 companies released their quarterly reports. Their Earning Per Share (EPS) are already updated in the Investdata price and earnings tracking (READ).

Lafarge Africa and Mutual Benefit notified the exchange of their primary market activities, that is, a plan to issue new shares by way of Rights to existing shareholders.

Market Outlook
This week, the market volatility will continue as repositioning and rebalancing on the strength of recent earnings, ahead of Q3 GDP and October inflation figure amidst year-end sentiments.
Although the earnings season is officially over, expect more numbers from laybacks. 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 looking down 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 oscillating market or pullbacks sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
Get your home study pack today and ride with the current recovery on Nigeria’s stock market and economy. By investing and trading knowledgeable in this recovery market.
The workshop materials on Trading and Investing for Financial Independence series are Available. Kindly call or send yes to 08032055467 or 08111811223.

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Best regards
Ambrose Omordion
CRO | Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467