Intraday Oscillation May Linger On Profit Taking, As Investors Await Outcome Of MPC Meeting

Market Update for November 25, 2019

Nigeria’s stock market started off the last week of the month of November with a mixed session on Monday, the same day the Central Bank of Nigeria (CBN) began the final two-day meeting of its Monetary Policy Committee (MPC) for 2019. 

The session was dominated by profit-taking and demand for stocks, continuing its bull-run on a low traded volume, just as sell position stood at 57%, with buy volume at 43% and Transaction Volume Index of 0.73.

Buying interest in Consumer Goods stocks: Nestle, Cadbury and Dangote Sugar; as well as insurance stocks lifted the market’s benchmark All Share index during the session.

We note that the new price methodology introduced not too long ago by the management of the Nigerian Stock Exchange (NSE) has boosted trading activities in stocks selling below N100 per share, especially the kobo equities requiring a small amount of money to move their prices. The situation has made stock in this class very volatile on the exchange, creating wealth for traders in the process. However, such stocks are equally very risky, just as the slow movement in highly capitalized stocks and have reduced the rate of the southward movement of the market index directly or indirectly.

Meanwhile, trading on Monday opened on the upside and was sustained till midday before starting an up-down movement by the afternoon on profit-booking in some equities that had rallied earlier. Demand for stocks, pushed the NSE index to intraday high of 27,109.29 basis points, from its low of 26,980.27bps, before closing the session higher above 27,000 psychological line, at 27,035.78bps on positive breadth.

Monday market technicals were positive and mixed, with volume traded higher than the previous day, with breadth favouring the bulls, just as sentiment were mixed as revealed by Investdata’s sentiment report. The momentum behind the day’s performance was slightly down, with Money Flow Index reading 48.33 points, from the previous 49.55bps, indicating that funds left some stocks, despite the fact that the market closed in green.

Index and Market Cap
The All Share index, at the end of the session gained a marginal 44.36bps, closing at 27,035.78bps from its 26,991.42bps opening, representing a 0.16% growth, while market capitalization rose by N21.41bn, closing at N13.05tr, from an opening value of N13.03tr, which also represented a 0.16% value gain.

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The day’s upturn was driven by buying an interest in Nestle, Stanbic IBTC, Guaranty Trust Bank, Presco, Cadbury, UACN, Dangote Sugar, Fidelity Bank, Wema Bank, and Transcorp. These impacted positively on the NSE’s Year-to-Date loss, reducing it to 13.98%, while market capitalization gain increased to N1.32tr, representing 11.30% growth from the year’s opening value of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Consumer Goods and Insurance that closed higher by 2.73% and 0.39% respectively, while the NSE Industrial Goods index led the decliners, after shedding 0.49%. It was followed by the NSE Banking with 0.32% down and NSE Oil/Gas index, 0.12%.

Market breadth remained positive as advancers outnumbered decliners in the ratio of 20:16, while market activities were up in volume and value traded by 11.21% and 13.03% respectively to 230.65m shares worth N3.21bn, from previous day’s 207.4m units valued at N2.84bn. This volume was boosted by transactions in banking stocks like Zenith Bank, FBNH, and Guaranty Trust Bank. Activities of these banks were more sell than buy transactions.

Law Union Insurance and Jaiz Bank were the best-performing stocks for the session, topping the advancers table, after gaining 10% and 9.52% respectively to close at N0.66 and N0.69 each, on the back of market sentiments and forces. On the flip side, Okomu Oil and Cutix lost 9.73% and 9.52% respectively, closing at N49.65 and N1.33 on market forces.

Market Outlook
We expect the intraday oscillation to continue on profit-taking and outcome of the MPC meeting that will close tomorrow to give clear direction If this capital wave and repositioning in value stocks will persist. The changing sentiments in expectation of improved liquidity as interest rates drop in the money market had trigger buying interest in stocks regardless of a high risk that is associated with investing equity.

The current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term views. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down.

Also, traders and investors need to change their trading strategies due to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future, and another fiscal policy initiative that may provide liquidity for the economy and market.

https://investdata.com.ng/2019/11/intraday-oscillation-may-linger-on-profit-taking-as-investors-await-outcome-of-mpc-meeting/#more