NGSE Indicators Soar Higher, As CBN’s Squeeze, Better Yield, Lures Investors To Equities

Market Update for November 12

Tuesday’s trading activities on the Nigerian stock exchange (NSE) sustained the previous session’s upward trend with the benchmark index closing higher to start the week on a positive sentiment after the public holiday declared by the Federal Government on Monday.

The improving buying momentum signals the fact that investors are taking advantage of low prices in the market to position early ahead of year-end, as well as the expected release of major economic data. Some analysts also see a direct link between the crash in deposit rate to single digit in the money market, as banks play safe to avoid regulator hammer in relation to the 65% Loan-Deposit Ratio directed by the Central Bank of Nigeria (CBN) by end of December.

The big drop in the rate for fixed deposit and other money market instruments seen for most of 2019 has made equities much more attractive from a Dividend Yield perspective, which is one reason a sector like banking had rebounded in the past few days. Most banking stocks pay high dividends, which look attractive when compared to fixed income market yields.

Even so, in recent times, the yields of some listed companies are higher than inflation and the CBN Monetary Policy Rate of 11.24% and 13.5% respectively.
With the NSE’s dividend yield currently at 5.08%, looking at the nation new capital formation, the CBN’s directives and flow of funds, the possibility of Treasury Bill rates crashing very soon is high, as the Monetary Policy Committee (MPC) prepares to hold its final meeting for 2019.

Meanwhile, the NSE’s index opened Tuesday’s trading on the upside in the early hours and sustained it till the afternoon, despite the oscillating market forces of accumulation and profit booking. This pushed the index to an intraday high of 26,513.60 basis points, from its low of 26,314.49bps, before pulling back while closing the day higher at 26,456.39bps on above average traded volume.

Market technicals for the day were positive and mixed, with traded volume lower than the previous day’s in the midst of positive breadth and higher buying pressure, as revealed by Investdata’s reports showing a ‘buy’ volume of 72% and ‘sell’ position of 28%.
The day’s Transaction Volume Index stood at 1.45, while the momentum behind the day’s performance improved, with Money Flow Index reading 51.66 points, from the previous session’s 42.05bps. This is an indication that funds entered some stocks and the market.

Index and Market Cap
At the end the day’s trading, the benchmark NSE All-Share Index gained 141.90 to close at 26,456.39bps from its 26,314.49bps opening, which represented a 0.54% gain, just as market capitalization was up by N69.08bn, closing at N12.88tr from an opening value of N12.77 trillion, which also presented a 0.54% value loss.

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The day’s upturn was driven by demand for stocks like Dangote Cement, MTNN, Guaranty Trust Bank, Zenith Bank, Stanbic IBTC, UBA, Access Bank, CCNN, NB, UACN, Consolidate Hallmark Insurance and Honeywell. These impacted positively on the NSE’s Year-to-Date loss, which reduced to 15.83%, while market capitalization gain inched to N1.16 trillion, representing 9.88% up from the year’s opening value of N11.72tr.

Bullish Sector Indices
All the sectoral performance indexes closed green, except for the NSE Oil/Gas index which closed flat. The NSE Industrial Goods index led the advancers, after gaining 1.56%, followed by NSE Banking with 1.35%, while NSE Consumer Goods and Insurance closed climbed 0.33% and 0.21% up respectively.

Market breadth was positive as advancers outnumbered decliners in the ratio of 18:11, while market activities were mixed with volume traded dropping by 12.52% to 378.35m shares, from the previous day’s 432.47m units, while transaction value rose 28.17% to N7.15bn from Tuesday’s N5.58bn.

Volume was boosted by transactions in Zenith Bank, Access Bank, Guaranty Trust Bank, Nigerian Breweries and Fidelity Bank.

CCNN and Union Diagnostic were the best-performing stocks, topping the advancers table, after gaining 9.14% and 9.09% respectively to close at N19.10 and N0.24 each, on the back of positive sentiment for the ongoing merger process with Obu Cement, as well as market forces. On the flip side, Ikeja Hotel and Courtville Business Solution lost 9.28% and 8.70% respectively, closing at N0.88 and N0.21on market forces

Market Outlook
We expect stocks to continue wobbling on the back of value investing and reduced selloffs as market players digest the Q3 scorecards and align their portfolios along those with impressive numbers, in expectation of improved liquidity and positive economic data such as inflation number billed to hit the market on Friday. The recent NSE’s new lows offer 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 other fiscal policy initiative that may provide liquidity for the economy and market

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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Tel: 08028164085, 08032055467

https://investdata.com.ng/2019/11/ngse-indicators-soar-higher-as-cbns-squeeze-better-yield-lures-investors-to-equities/