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Banks’ Q3 Earnings, Inflation Data, MPC Outcome May Decide NGSE Slant This Week

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Market Update for the Week Ended November 13 and Outlook for Nov 16-20

By Investdata Analysts

Mixed Sessions Ahead On NGSE, Amidst Q3 Earnings Inflow, Profit Booking

The nation’s stock market last week went on fire following a surge in demand for equities after money market rates crashed lower, triggering further inflow of funds into fundamentally sound stocks that pushed the benchmark index higher on a huge traded volume and positive sentiments.

This was helped by the continued crash in Treasury Bills rate to 0.30% at the midweek, despite being oversubscribed, which pushed funds into equities on Thursday making the week a historic one for the NSE All-Share index as it posted its biggest daily gain in over five years. The index also surpassed the set 5% threshold, resulting in a 30-minute halt in trading for the first time since the circuit breaker was introduced in 2016.

The market extended its bull transition for the eighth successive week with more companies hitting new 52-week highs on a strong volatility and traded volume that reflected the buying interest among players. The key performance index remained within the overbought region at the end of the period under review, signaling the possibility of pullbacks as profit taking hit the market on Friday.

Price correction at this point, may however be short-lived, and not last more than four or five days in the new week, due to the level of funds entering the market, and if the expected banking earnings start hitting the market, and beat expectations.

Interpretation of the government’s proposed unclaimed dividend and bank balance trust fund and its implication will further influence the market, going forward, in addition to the expected October inflation data from National Bureau of Statistics, as well as the final Monetary Policy Committee (MPC) outcome. The low yield in the fixed income market has been made worse by the negative real rate of returns on investment, especially given the inflationary pressure that continues to threaten the investment windows in the face of oscillating oil, mismatch in economic policies and rising national debt profile.

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Movement Of NSEASI

It was a bullish week, despite Friday’s down market attributable to profit booking after weeks of a bull-run that wiped away the 2019 losses as recovery waxed stronger on an increasing market liquidity and buying interest. Between Monday and Thursday, the composite NSEASI closed green, before losing 0.89% on Friday, bringing the week’s cumulative gain to 12.97%, a significant jump from the previous week’s 1.56%.

Consequently, the NSE index opened for the week at 31,016.17 basis points, touching an intra-week high of 35,814.18bps and a low of 30,733.47bps, due to high buying pressure witnessed during the period, before closing at 35,037.46bps. During the period also, market capitalization gained N2.1tr, closing at N18.31tr, from the previous weekend’s N16.21tr, representing 12.97% value appreciation in investors’ portfolios.

During the week, five companies released their quarterly scorecards, of which three were Q3 earnings from Ellah Lake, Mutual Benefits Assurance and BOC Gases; while Q2 numbers came from Learn Africa Plc. Also within the period, FTN Cocoa Processors Plc presented its 2019 full-year results to the market. Just as Airtel Africa’s share price was adjusted for interim dividend of N5.79 per share as recommended by its directors.

The week’s advancers’ table reflected the bull rampage in the period, just as the positive breadth showed a high demand for stocks, with the number of gainers outpacing decliners in the ratio of 69:12 on a high positive sentiment and strong momentum as Money Flow Index remained at 100bps, for the past four weeks.

NSEASI WEEKLY CHART MOVEMENT

The composite index continues to maintain the V-shape recovery momentum on a high traded volume and positive sentiment, despite the pullbacks as liquidity continued to flow into impressive financials and high dividend paying equities. This trend is likely to persist if the banking numbers beat market expectations. For now, the index has broken various resistance levels as projected, and is set to breakout the 36,000bps on renewed buying interests and portfolios repositioning, even as more banking financials are expected to hit the market this new week.

The bullish trend of the index remained intact, trading above the 50 and 100-Day Moving Average on a high traded volume. It is another attraction for institutional investors as it reveals strength in the market, just as the index tests the Fibonacci retracement line of 161.8%, which was a strong resistance level as it heads to 261.8%.

However, we envisage an uptrend in the midst of profit-taking, more scorecards and economic data hitting the market, given that MACD remains in the bullish zone. The buy volume for the period stood at 85% and sell position of 15%,with total transaction index at 3.17.

BullishSectoral Indices

The performance indexes across the sectors were bullish, led by NSE Industrial goods after gaining 16.97%, followed by Banking that closed 14.37% higher, while the NSE Consumer Goods, Insurance and Oil/Gas were up by 11.35%, 7.67% and 5.34% respectively.

The general market outlook in recent times seems positive and mixed in the short-term; following which investors should take short and medium-term positions while diversifying their portfolio along long-term trades to protect capital. This, they can do, by considering sectors with high upside potentials on the strength of earnings and policy influence. The recent market rally calls for caution as numbers from some companies and sectors were mixed as should be expected, given the negative impact of the COVID-19 pandemic and the EndSARS protest on full-year results, as revealed by the macroeconomic indices.

The week’s transactions in volume and value terms were up by 117.84% and 159.41% respectively, as investors exchanged 4.51bn shares worth N58.73bn, compared to the previous week’s 2.07bn units valued at N22.64bn. Volume was driven by trades in financial services, Consumer Goods and Conglomerate sectors, driven by transactions in Zenith Bank, FBNH, Transcorp, Dangote Sugar, and Access Bank.

Oando and Japaul Oil were the best performing stocks during the week, gaining 48.15% and 43.48% respectively, closing at N4.00 and N0.33 each on positive sentiment and market forces. On the other hand, Ikeja Hotel and Global Spectrum Energy Service lost 9.91% and 9.89% respectively, at N1.00and N4.19 per share on market forces and profit taking.

Market Outlook

We expected a mixed week, as more banks’ earnings are likely to hit the market, in addition to the ongoing interpretation of numbers released so far, as well as the proposed unclaimed dividend and bank balance trust fund by the government, in the midst of profit taking, among others.

Meanwhile, given the persisting bull-run, profit taking is evitable, being a regular behaviour of stock markets. Any price correction at this phase of market recovery will support the upside potential, especially with many fundamentally sound stocks remaining underpriced, and the dividend yield of major blue-chips continuing to look attractive, despite the recent weeks’ rally.

Bull-trend may continue on funds inflow, corporate numbers, profit-taking

Ambrose Omordion, Chief Research Officer, InvestData Consulting Limited

info@investdata.com.ng

ambrose.o@investdataonline.com

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