NGSE: Renewed Interest, Amidst Low Valuations, Positioning Amidst Better Economic Indices
Market Update for December 12
Volatility on the Nigerian Stock Exchange (NSE) continued at the midweek, with the benchmark All-Share index closing lower on a high volume traded driven by huge losses suffered by the insurance sector and high cap stocks like Nigerian Breweries, 11 plc and Zenith Bank, despite the positive breadth.
The oscillating trend ahead of the year-end rally on improved volume and mixed technicals are signals of bargain hunters and other market players repositioning for the expected Santa Claus rally as economic indices remain positive in the last quarter which is likely to boost earnings performance of many listed companies at the end of 2018 financial year end.
The composite NSEASI opened trading on slight upside in the morning but pulled back in the mid-morning to early afternoon before retracing up few minutes to the session’s close, reducing the magnitude of lose. This was however after the index had touched intraday lows of 30,611.08 basis points, from highs of 30,771.47bps before finally finishing the day at 30,642.35bps.
Market technicals were weak and mixed as volume traded was higher than previous day’s in the midst of strong selling pressure as revealed by Investdata’s Daily Sentiment Report, showing a sell position of 81% and 19% buy volume. Volume index for the day’s total transactions was 1.00.
Energy behind the day’s market performance was stronger, as reflected in the money flow index at 20.48bps, up from previous day’s 17.92points, indicating that funds entered some stocks in the midst of the prevailing low market liquidity.
Index and Market Cap
At the end trading, the NSEASI shed 76.37bps, closing at 30,642.35bps from the 30,718.70bps, representing 0.25% decline, just as market capitalization fell by N27.90 billion, closing at N11.19tr from an opening value of N11.22tr, representing a 0.25% value loss.
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Wednesday’s downturn followed losses suffered by Nigerian Breweries, 11 plc, Zenith Bank, FBNH, UBA, Access Bank, Diamond Bank, Dangote Sugar and Honeywell among others. This impacted negatively on Year-to-Date loss position, raising it to 19.88%, while market capitalization decline YTD came to N2.42tr from its opening level in January, representing 17.76% decline during the period.
Bearish Sectors Indices
The sectoral indices were largely bearish except for the NSE Industrial that closed in the green, just as market breadth remained positive with advancers outnumbering decliners in the ratio of 24:20.
Market activities were up in volume and value by14.28% and 8.53% respectively to 246.13m shares worth N3.69bn, compared to previous day’s 215.38m units valued at N3.40bn, Transactions volume were driven by financial services stocks like: Zenith Bank, FBNH, Access Bank, Diamond Bank and Guaranty Trust Bank.
The best performing stocks for the session were CAP and Forte Oil that topped the advancers table, after gaining 10% and 9.75% respectively, closing at N34.63 and N21.95 each on market forces and low prices. The decliners’ side was led by Conoil and AXA Mansard, following their 10% loss apiece, closing at N20.25 and N1.80 each, on market forces and profit taking.
Market Outlook
We expect this volatilityto be sustained as bargain hunting and portfolio repositioning for year-end to shape performance of the market ahead of Santa Claus rally, as number of companies hitting new 52-week low are on the increased to reflect undervalue state of the market.
The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of full year company earnings position and post-election market dynamics. These are likely to drive prices north, or south, while determining market direction before or after the Presidential Election.
Investors should review their positions in line with their 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 low in the midst of weak company, economic and market fundamentals.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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