Market Update for November 21
Tuesday’s trading on the floor of the Nigeria Stock Exchange ended on a negative note amidst technicals, which reflected bearish sentiments as traders and investors begin to gradually add the outcome of the day’s Monetary Policy Committee (MPC) meeting to the array of data that have graced the market so as to take a holistic decision on the direction of the market and indeed, the nation’s economy for the short, medium to long-term investment purpose. Before the meeting of the Central Bank of Nigeria’s MPC, data that and happenings in the market in recent weeks, besides the Q3 earnings season filings, stakeholders are trying to make sense of today, are the inflation and Gross Domestic Product (GDP) data, the MSCI Frontier Market outcome, Moody’s downgrade of the Nigerian sovereign and banks, confidence, the 2018 Appropriation Bill, as well as purchasing managers’ indices among others.
On Tuesday, the MPC at the end of its two-day meeting, the committee did not vote for easing of monetary policy to reduce cost of funds, increase lending by banks and in the process further boost productive activities to drive growth. Members voted eight to one to retain all rates, despite the relative improvements in the economy, warning that economic recovery remains fragile yet, considering where it was before slipping into recession. The committee also based their not-yet-time-to-clink-glasses decision on the fact that Nigeria’s population growth rate was faster than the GDP’s 1.4%.
That said, there is every need today than ever before for the monetary and fiscal authorities to redouble their efforts, strategies to undertake a review of their strategies, while critically assessing progress and impact to sustain and even improve on the recovery as revealed by the positive economic data and the latest Q3 GDP data. Profit booking as mentioned in our Monday update, where we warned that with the three trading sessions of gains, traders are likely to take their profit which took place at the end of trade on Tuesday.
The day started out with a little gap up in the index before the midday pullback into red where it lingered for the rest of the day, until the last minutes when there was a slight support at 36,579.63 from the intraday high of 36,864.64, to close lower for the day.
Market breadth also turned negative on Tuesday with high selling pressure of 93% on improved volume as revealed by the volume index of 0.86 and buying position at 7% of the total transactions of the day, halting market recovery to pullback the NSE All-Share index to its 20-DMA. It was however above the 50-DMA as money flow for the day turned head-down to reflect the bear situation of the day.
Meanwhile, the NSE’s composite index shed 192.52 basis points to close at 36,600.07 from the 36,792.60 points it opened, which represented a 0.52% decline, just as market capitalisation went down by N67.01bn to close at N12.74tr from the previous N12.81tr, representing a 0.52% value lost in investors’ portfolios.
The day’s downturn resulted from losses suffered by medium and high cap stocks like Forte Oil, Zenith Bank, UBN, FBNH, PZ, Dangote Flour, Stanbic IBTC, PZ, Flourmills and Nigeria Breweries as investors and traders took profit, a situation that impacted negatively on the ASI’s year-to-date return, reducing it to 36.19%, just as YTD growth in market capitalisation stood at N3.5tr, representing a 37.76% rise over the year’s opening value.
Market breadth for the day was negative as the number of decliners outpaced advancers in the ratio of 22:19 on a low traded volume that was higher than previous day level.
Market activities in terms of volume and value were up by 23.58% and 34.29% respectively to 257.93m shares valued at N3.29bn from the previous day’s 208.71m units worth N2.45bn.
At the end of the day’s trading session, Champion Brewery topped the advancers’ log, gaining 9.09% to close at N2.16 per share, on market forces, followed by Linkage Assurance which notched 5.17% to close at N0.61 on market forces.
On the flipside, Forte Oil shed a further 8.86% to close at N40 each on profit taking and the probable impact of its exit from MSCI index, ahead of Caverton which lost 5.30% to close at N1.25 each also on profit taking.
Following the MPC’s decision to retain MPR and other rates, expect volatility to continue due to profit booking, portfolio rebalancing and repositioning along the earnings surprises, positive economic data and end year rally as oil price continue to look up in this season.
Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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