Increased Buy Interest, Amidst Dividend Declaration, Q1 Portfolio Repositioning

Market Update for March 19
The negative outing on the Nigerian Stock Exchange (NSE) persisted Tuesday as the composite All-Share index increased its losing momentum to close lower on relatively high volume traded driven by selloffs in highly capitalized stocks. This followed the failure of the ongoing earnings season and dividend payout failed to turn around the market due to the dwindling confidence and liquidity levels in the equity segment of capital market.

In a move likely to enhance spending capacity in the economy, the Nigerian Senate, also on Tuesday approved the proposed new minimum wage of N30,000, representing 66.7% increase from N18,000. The government however seems to be giving with one hand and collecting with the other, following plans to immediately raise Valued Added Tax (VAT) by 50%, from the current 5% to 7.5%. We believe that this increment in VAT will not make the minimum wage increase impact the lives of civil servants, because prices of goods and services will increase more than the net difference of 16.7% recorded between the wage increase and VAT.

Trading for the day started out with a move down between the morning session and midday, before consolidating in the afternoon as it moved back up again, but when it could not get through resistance, the index started to rollover in a very orderly fashion, which opened to be retested. It bounced back late in the day, but in the last minutes rolled over, reducing the position and finished lower on mixed sentiments.

The NSE index touched intraday low of 30,965.22 basis points to breakdown the 31,000 mark from its highs of 31,133.56bps, before retracing up, to close the session at 31,082.32bps.

Tuesday’s market technicals were negative and mixed with volume traded higher than previous day’s in the midst of negative breadth and improving buying sentiment, as revealed by Investdata’s Daily Sentiment Report, showing a buy position 70% and sell volume of 30% on total daily transaction volume index at 0.82.

Energy behind the day’s market performance was weak but slightly up despite the bear trend as shown by money flow index at 22.28 points, up from previous day’s 21.21bps, indicating a slowdown in the rate at which funds are exiting the market. This was as investors thirst for banking stocks increasing due to earnings expectation and dividend possibility from second tier banks.

Index and Market Cap
At the end of trading, the All Share index (NSEASI) lost 43.07bps to close at 31.082.32bps, from an opening figure of 31,125.39bps representing 0.14% decline; while market capitalization shed N16.06bn, closing at N11.59tr, from its opening value of N11.61tr, also representing a 0.14% depreciation in value.

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The session’s downturn was impacted by selloffs in medium and high cap stocks like Dangote Cement, Nestle, Nigerian Breweries Stanbic IBTC, Presco, PZ, Dangote Sugar, Dangote Flour, as well as Diamond Bank. This impacted negatively on Year-to-Date loss position, raising it to 1.11%, while market capitalization loss increased to N69.8bn from the year’s opening level of N11.72tr, representing a 1.11% decline in value

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Banking and Oil/Gas that closed green, while others were down due to selloffs and profit booking even as market breadth was almost flat, with decliners outpacing advancers in the ratio of 18:17.

Market activities were up in volume and value by 39.46% and 60.70% respectively to 286.90m shares worth N3.09bn, compared to the previous day’s 205.73m units valued at N1.93bn. Volume was driven by financial services and ICT stocks like: Access Bank, UBA, Zenith Bank, Guaranty Trust Bank and Chams.
Companies that have so far enjoyed positive reaction to their 5 kobo dividend per share since the announcement are McNichols and First Aluminum, emerging the best performing stocks for the day. They gained 10% and 7.14% respectively to close at N0.66 and N0.30 per share on market sentiment and forces respectively. On the flipside, Presco and GSK lost 9.33%% and 9.09% respectively, closing at N68.00 and N10.50 each, on the back of profit taking and market forces.

Market Outlook
With the increased buying interest in low cap stocks ahead of their dividend declaration and end of the quarter portfolio repositioning we expect selloff to subside, as investors look forward to positive economic statement and policy to give direction. Volatility may however continue, as market players adopt the wait-and-see attitude in the face of repositioning for the ongoing 2019 dividend declaration season and relative post-general elections peace to shape market performance in the interim. We advise cautious trading and investing while positioning in fundamentally sound equities.

Volatility will also continue as investors and fund managers reposition their portfolios, with eyes fixed on earnings reports, but investors should review their positions in line with their investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value.

We advise also that investors should allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
https://investdata.com.ng/2019/03/increased-buy-interest-amidst-dividend-declaration-q1-portfolio-repositioning/