Stocks Slip Further, Offers New Opportunities, As NGSE Becomes Further Undervalued

Market Update for December 5

Stocks closed lower again on Thursday as trading on the Nigerian Stock Exchange (NSE) maintaining a sluggish down trend as mixed sentiments prevailed on profit booking and sell down in some equities that had appreciated earlier in value. The wait-and-see attitude of market players in the first trading week of December is likely to close negative, thereby halting the four weeks of bull-run.

Earlier on Thursday, Moody’s downgraded Nigeria in its recent rating from stable to negative, indicating that all is not well with the nation’s economic indices and other indicators which remained mixed.

Once again, we expect that the government would do the needful to change the narrative.

Also during the day, the Senate passed the 2020 budget, which would the harmonized with that of the House of Representatives before a final copy will be presented for Presidential assent. Recall that the Appropriation Bill was presented by President Muhammadu Buhari to a joint session of the National Assembly on October 8, 2019. We hope that the President signs the 2020 budget into law in the same spirit of the lawmakers, to achieve the desired change in the national budgetary cycle to January-December. This will enable businesses plan their operation. The Senate increased the government’s spending plan to N10.56tr from the initially estimated N10.32tr to allow for intervention in critical sectors of the economy, even as an expansionary budget is needed to further stimulate the nation’s struggling economy.

Meanwhile, Thursday’s trading started marginally on the upside in the morning before pulling back in the mid-morning and oscillated for the rest of the trading session on profit taking selloffs and positioning in some stocks. This pulled the NSE index to an intraday low of 26,889.48 basis points, from its high of 26,948.58bps, before it retraced up to close the session lower at 26,913.70bps on a low traded volume.

Thursday’s market technicals were negative and mixed as volume traded was higher than the previous day, in the midst of negative  breadth and  continued  mixed sentiment as revealed by Investdata’s sentiment report of a 41% ‘buy’ volume and 59% sell position. The day’s total transaction volume index stood at 0.66, with a weak energy behind the day’s performance as Money Flow Index read 47.96 points, from the previous 57.52bps. This is an indication that funds left some stocks and the market.

Index and Market Caps

At the end of the day’s trading, the benchmark NSE All-Share index lost 24.88bps, closing at 26,913.70bps from its openings of 26,938.58bps, representing  0.09% drop, just as market capitalization  was down by N12bn to close at N12.99tr from an opening value of  N13tr, which also represented a 0.09% depreciation in investors’ portfolios.

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The session’s downturn was attributed to selloffs in stocks like Guaranty Trust Bank, UBA, Access Bank, FBNH, Oando, Wema Bank, Honeywell, AXA Mansard and Cornerstone Insurance, which impacted negatively on the NSE’s Year-to-Date loss, increasing it to 14.37%. Market capitalization gain for the period dropped to N1.21tr, representing a 10.85% growth from the year’s opening value of N11.72tr.

Mixed Sector Indices

The sectoral performance indices were largely bearish, except for the NSE Consumer and Industrial Goods indexes that closed 0.69% and 0.01% higher respectively, while NSE Insurance led the decliners after losing 2.52%. It was followed by Banking and Oil/Gas indexes, which were down by 0.67% and 0.03% each.

Market breadth turned negative as decliners outpaced advancers in the ratio of 19:8, while market activities were up in volume and value by 83.6% and 164.2% respectively to 207.26m shares worth N2.85bn from the previous day’s 112.89m units valued at N1.08bn. Volume was driven by transactions in UACN, Access Bank, Guaranty Trust Bank, Zenith Bank and FBNH.

Chams and Union Diagnostic were the best-performing stocks for the day as they topped the advancers table, chalking 9.09% and 8.33% respectively to close at N0.36 and N0.26 each respectively, on the back of market forces. On the flip side, Cornerstone Insurance and Medview Air lost 10% each, closing at N0.63 and N1.62 on profit-taking and sell down.

Market Outlook

Being the last trading day of the week, we expect the mixed performance to continue as investors take advantage of the four correctional profit-taking and indecision among market players to position. This ahead of the usual Santa Claus and year-end rally as capital flow and repositioning in value stocks will persist. There is also the changing sentiment in the expectation of improved liquidity and positive economic indices. At the maturity of OMO investment, more funds will be available as CBN has restricted players to foreign investors and the local banks.

Again, the current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term views. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down to usher in 2020.

Also, traders and investors need to change their trading strategies due to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.

Take Action

INVEST 2020: Opportunities and Trade Ideas Summit Holds this Saturday!

Sub-Topics

Recession or Boom: Five Trading Strategies for Picking Best Stocks in Good Times or Bad-AlhajiGarbaKurfi, Managing Director of APT Securities & Funds Limited.
2020 Global/Nigeria Macro-Economic Outlook & Sectors To Position,   RasaqAbiola, Head, Corporate Strategy  CSCS Nigeria Plc
Critical Chart Patterns For Pinpointing Stocks That Could Explode Higher In 2020- Abdul-Rasheed OshomaMomoh, Head, Capital Market, TRW Stockbrokers Limited,
Keys To Identify Opportunities In Stocks, Exchange Traded Fund (ETF) Fixed Income and Commodities Markets In Any Market Environment.- Ekwueme Mike Anaydibe, Head, Fixed Income Sales at TRW Stockbrokers Limited.
Mastering Earnings & Dividend Game Plan For 2020 Investing Opportunity & Beyond– Ambrose Omodion, Chief Research Officer, InvestData Consulting Limited,
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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
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