Market Update for October 27
By Investdata Analysts
Equity prices closed higher on the Nigerian Stock Exchange (NSE) Tuesday, as the All-Share index sustained its positive momentum and bullish trend on high traded volume and buying pressure, as normalcy gradually returns to the nation after weeks of #EndSARS protests across the country, that led to last Tuesday’s shooting by soldiers at protesters in Lekki toll plaza in Lagos. This had been followed by wanton destruction of public and private property and looting of palliative warehouses among others.
The number of stocks on the gainers’ table increased in the midst of an overbought market and strong recovery at the peak of earnings reporting season. Score-cards released on Tuesday were Flour Mills Nigeria, NASCON Allied, and Linkage Assurance to which investors reacted positively as their share price appreciated in value, even as the waiting game for more earnings continues ahead of month-end’s deadline for submission of quarterly reports.
The benchmark index rallied for the fourth successive session as investors weighed the corporate earnings released so far against dividend possibility as the year winds down. Fundamentally sound stocks with consistent dividend history and high payout remain the target of market players as more liquidity flows into the market, searching for higher yields.
The financials from Flour Mill and NASCON seem to give another notion and insight into the sector, given that the numbers are a departure from what Unilever Nigeria and Guinness Nigeria posted earlier. The Consumer Goods sector has continued to post mixed numbers, but the remaining Q3 numbers will give the next direction.
Tuesday’s trading started out green, and was sustained throughout the session on a strong buying interest that pulled the composite index to an intraday high of 28,980.29 basis points where it closed, from its 28,685.54bpt low on a less than average traded volume.
Market technicals for the session were positive and strong as volume traded was higher than the previous session in the midst of breadth that favoured the bulls on positive sentiment, as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ volume and 0% sell position.
Total transaction volume index stood at 1.02 points, just as energy behind the day’s performance remained relatively strong, with Money Flow Index looking down at 61.39 points, from the previous day’s 64.49 points, an indication that funds left some stocks, despite the up market.
Index and Market Caps
The All Share index gained 202.33bps at the end of Tuesday’s trading, representing 0.70% growth over the 28,777.96ps opening level, just as market capitalization rose by N105.76bn to N15.148tr, after opening of N15.041tr, also representing 0.70% value gain.
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The day’s upturn was driven by position taking in low, medium and high cap stocks like BUA Cement, Guaranty Trust Bank, Flour Mills, ETI, Guinness Nigeria, Conoil, Vitafoam, Eterna, Cadbury, Mansard Insurance and Linkage Assurance, among others. This impacted positively on the index, as Year-To-Date gains, which increased to 7.97%, while Market capitalization YTD gain to N2.19tr, or 16.79% above the year’s opening value.
Bullish Sector Indices
Performance indexes across the sector were bullish, as the NSE Insurance led the advancers, gaining 2.72% followed by Banking which climbed 2.16% up, while Consumer Goods, Oil/Gas and Industrial goods closed higher by 0.92%, 0.82% and 0.45% respectively.
Market breadth remained positive as advancers outweighed decliners in the ratio of 46:2, while activity in volume and value terms were mixed with traded volume up by 13.14% to 385.6m shares, from the previous 349.8m units, The value of trades however dropped by 47.59% to N2.91bn from Monday’s N5.56bn, with volume driven by trades in FBNH, Access Bank, Fidelity Bank, ETI and UBA.
Linkage Assurance and Conoil were the best performing stocks, gaining 10% and 9.81% respectively, closing at N0.44 and N17.35 each, on market forces and sentiment. On the flip side, Wema Bank and NEM Insurance lost 1.72% and 1.46% respectively, closing at N0.57 and N2.03 respectively on profit taking.
We expect this volatility to continue, as market players digest the numbers released so far and readjust their portfolio. The current divergence between the NSE index and indicators signal correction is underway.
The mixed intraday movement is likely to persist for the rest of October in the midst of expected earnings, profit booking, as well as the mismatched economic policies and negative macroeconomic indices. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation, negative Q2 GDP of 6.1% and unstable economic outlook for the rest of 2020 as government and its economic managers are going front and back with mismatched policies and implementations.
Also, investors and traders are positioning amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend.
We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their Q3 numbers and dividend on the strength of their earnings capacity as end of the year is at the corner, considering the seasonal swing trend that are associated with the last quarter of the year.
Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.