NSE Index Decline Further, As Low Volume Signals Imminent Reversal, Entry By Smart Money

Market Update for December 9

The Nigerian stock market continued its correction for the sixth trading session, after closing positive for the month of November, forming a bearish divergent index action, just as volume traded signals that the ongoing pullback is short-term, even as players book profits.

The benchmark Nigerian Stock Exchange All Share Index (NSEASI), therefore, recorded the highest loss since October 10, closing below its 20-Day Moving Average on a low traded volume. The low supply in the market indicates an imminent reversal, with smart money likely to markup prices soon. However, let us await confirmation of the next direction.

The regulatory induced capital wave and sentiments are expected to drive economic growth and ‘buy’ interests in stocks, given the prevailing low-interest rates in the money market, which will enhance system liquidity needed to boost productivity and consumption, while supporting economic recovery in 2020. These will be given the necessary boost by the planned early passage and assent to the 2020 budget, just as the Finance Bills (READ MORE) that will support the new tax system and government revenue structure will help fund the 2020 spending plan of government.

Meanwhile, trading for the week started on the downside, which was sustained throughout the session on selloffs and profit-taking, despite the oscillation as the benchmark index touched intraday low of 26,562.25 basis points, from its high of 26,855.52bps. It thereafter retraced up, closing the session lower at 26,681.31bps on negative market breadth.

Monday’s market technicals were negative, with lower volume traded than the previous session, amidst the negative breadth and continued mixed sentiment as revealed by Investdata’s sentiment report of a 36% ‘buy’ volume and 64% sell position. The day’s total transaction volume index stood at 0.62, with strong momentum as shown by the Money Flow Index of 52.90 points, up from the previous 49.60bps. This is an indication that funds entered some stocks, despite that the market closed lower.

Index and Market Caps

At the end of the day’s trading, the NSEASI lost 174.21bps, closing at 26,681.31bps from the 26,855.52bps it opened, representing  0.65% decline, just as market capitalization fell by N84.07bn to close at N12.88tr, from N12.96tr, which also represented a 0.65% value decline in the value of investors’ portfolios.

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The day’s downturn was impacted by selloffs and lingering profit taking in Dangote Cement, Guaranty Trust Bank, Zenith Bank, UBA, Access Bank, ETI, FBNH, Oando and UACN, which impacted negatively on the NSE’s Year-to-Date loss, increasing it to 15.11%. Market capitalization gain for the period dropped to N1.02tr, representing a 9.04% growth from the year’s opening value of N11.72tr.

Bearish Sector Indices

All sectoral performance indexes were in red, except for the NSE Insurance that closed 1.25% green, while the NSE Banking led the decliners, after losing 1.94%, followed by the Industrial Goods Index’s 1.12%; while the NSE Consumer Goods and Oil/Gas indexes shed 0.13% and 0.03% respectively.

Market breadth was negative as decliners outpaced advancers in the ratio of 28:5, while market activities were mixed with volume traded dropping by a marginal 2.21% to 192.68m shares from the previous day 197.04m units. Transaction value inched up 0.45% to N3.55bn, from Friday’s N3.53bn.

AXA Mansard Insurance and Cornerstone Insurance were the best-performing stocks of the day as they topped the advancers table, chalking 9.09% and 7.94% respectively to close at N1.80 and N0.68 respectively, on the back of market forces and sentiment. On the flip side, Berger Paints, and C & I Leasing lost 10% and 9.24% respectively, closing at N6.75 and N5.40 on selloffs.

Market Outlook

We expect the mixed performance to continue as investors take advantage of the correctional profit-taking and low supply to position, ahead of the usual Santa Claus and year-end rally as capital flow and repositioning in value stocks continue. There is also the changing sentiment in the expectation of improved liquidity and positive economic indices. At the maturity of OMO investment, more funds will be available given the Central Bank of Nigeria’s restriction of the OMO market to foreign investors and domestic banks.

Again, the current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term horizons. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down to usher in 2020, just as was noted in the 10 golden stocks and trading ideas for 2020 discussed last weekend during the Investdata  2020 Traders & Investors Summit.

Also, traders and investors need to change their strategies owing to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.

Meanwhile, we appreciate all that made Invest 2020 Traders and Investors Summit a success. The home study pack will be available next week. To book for the pack , Send Yes or Stock to  08028164085, 08032055467, 08111811223 now.

Ambrose Omordion

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