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STOCK ANALYSIS: NSE index soars, but continuation may depend on market, economic dynamics



NGX Sustains Bullish momentum as ASI gains 2.22%
Market Update for November 11

By Investdata Analysts

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

The bull-run on Nigeria’s equity market continued at the midweek still very volatile, closing higher on a positive breadth and huge traded volume, thereby extending the uptrend for the fourth consecutive session on increasing buying momentum and sentiments. The positive sentiments for healthcare, banking, consumer goods and large cap stocks have helped the market to sustain its ongoing rally.

Liquidity, one of the market’s major fundamental has supported this recovery as revealed by money flow index at 100 points on daily basis, after reading 100 point over the past three weeks. These funds are flowing into dividend paying stocks and fundamentally sound equities with high earnings power that support stock prices. Many of these stocks are making new 52-week highs and at the same time breaking out their 2019 resistance level, a situation that calls for cautious trading and investing, despite the seeming upside potentials.

The classes of stocks driving the bull-run reveal how knowledgeable Nigerian investors and traders are becoming, given that these are companies with value and their sales estimates are looking up to support their prices. Also, the fact that investors are becoming wiser shows the impact of smart money while positioning in selected stocks.

Meanwhile, midweek’s trading started slightly on the downside and was the market was calm until midday, when it rebounded on price appreciation in stocks, a situation that pushed the index to an intra-day high of 33,268.35 basis points where it closed, up from its low of 32,585.04ps.

Market technicals were positive and strong as volume traded was higher, when compared to the previous session in the midst of positive breadth and sentiment, as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ volume. Total transaction volume index stood at 1.88 points, just as the impetus behind the day’s performance remained strong, with Money Flow Index looking up at 100 points, from the previous day’s 94.11points. This is an indication that funds entered the market in general.

Index and Market Caps

At the close of Wednesday’s trading, the composite index gained 621.26bps, closing at 33,268.36bps, representing a 1.9% growth, after opened at 32,647.10bps, just as market capitalization rose by N325bn to a record high of N17.38tr, which also represented a 1.9% value gain.

The uptrend was impacted by the increased buying sentiment in stocks like MTNN, BUA Cement, Dangote Sugar, Cadbury, and GSK, GTBank, Zenit Bank among others, which raised Year-To-Date gain to 23.94%, while Market capitalization YTD climbed to N4.45tr, representing a 31.58% above the year’s opening value.

Bullish Sector Indices

All the sectorial performance indexes were bullish, led by the NSE Banking index which gained 4.07%; followed by the NSE Consumer goods, 2.90%; while Oil/Gas, Insurance, and Industrial Goods closed 1.27%, 1.19% and 1.14% higher respectively.

Market breadth was positive as advancers outweighed decliners in the ratio of 51:7, while activity in volume and value terms were up by 48.27% and 17.05% respectively as investors trading 858.16m shares worth of N9.05bn, compared with the previous day’s 578.78 units valued at N7.74bn. Volume was driven by trades in FBNH, Transcorp Zenith Bank, UBA, Access Bank, Fidelity Bank and Guaranty Trust Bank.

Fidson Healthcare and Sterling Bank were the best performing stocks, after gaining10% each, on market trend and forces. On the flip side, ABC Transport and PZ lost 8.82% and 5.38% respectively, closing at N0.31 and N4.40 respectively on market forces and profit booking.

Market Outlook

Profit taking is underway, after the NSE index had broken out the 33,000 mark, a situation that signals a reversal of trends, but the strong and faster recovery may continue, depending on market forces at the midweek’s session. This will depend on the quality of Q3 score-cards presented, especially by the tier-1 banks, even as analyses of numbers released so far have helped reposition investors’ portfolios on the strength of sector and company’s performances.

The NSE’s index action and indicators are looking up in the same direction on a very high traded volume and positive buying sentiments.

Again, the current undervalued 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 in the rest of the year.

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

Ambrose Omordion, Chief Research Officer, InvestData Consulting Limited

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