Indicators Turn Red, As Investors Take Profit, ‘Reprice’ Assets, Balance Portfolio

Market Update for January 27
Nigeria’s stock market closed lower on Monday amidst assets repricing, portfolio rebalancing, and profit-taking, as investors and traders interpret the impact of the recent adjustment in the Cash Reserve Requirement set by the Central Bank of Nigeria last week at its Monetary Policy Committee meeting to 27.5% from 22.5%. Prices of banking and Consumer Goods stocks wobbled, with a negative impact on the NSE’s composite All-Share index as fear of likely reversal in the CBN’s Open Market Operation restrictions.
Construction giant- Julius Berger Plc presented its full-year earnings report after trading hours on Monday, showing impressive and strong numbers likely to support price movement, especially when the directors announce the corporate action. Revenue for the period was rose 36% to N264.56bn from N194.62bn in 2018, while bottom-line stood at N10.3bn, up from N6.1bn in the previous year, resulting in Earnings Per Share of N8.00, compared to N5.30 each in 2018. The numbers released so far have shown that Q4 2019 performance has impacted positively on 2019 scorecards.
Meanwhile, Monday’s trading opened slightly up in the early hours before pulling back in the mid-morning to the afternoon on portfolio rebalancing and profit-taking in banking stocks. This pushed the composite Index to an intraday low of 29,552.99 basis points from its high of 29,648.35bps, after which it finished the session lower at 29,552.99bps on a high traded volume.

Market technicals for the day were negative and mixed, with volume traded higher than the previous session’s, in the midst of market breadth that favoured the bulls and strong selling pressure, as revealed by Investdata’s Sentiment Report showing 100% ‘sell’ volume and 0% ‘buy’ position. The day’s total transaction volume index stood at 1.29, while the momentum behind the day’s performance remained relatively strong, even while declining further. Money Flow Index read 62.26points, from the previous 70.30ps, an indication that funds exited the market and some stocks.

Index and Market Caps
At the end of Monday’s trading, the All-Share Index shed 75.85bps, closing at 29,552.99bps from the 29,628.34bps of the previous session, representing a 0.26% drop. Market capitalization lost N39.07bn, closing at N15.22 trillion, from an opening value of N15.42tr, which represented a 0.26% value loss.
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Monday’s decline was impacted by profit-taking and selloffs in Zenith Bank, UBA FBNH, Access Bank, Unilever, Flourmills and Dangote Sugar, among others, which impacted negatively on the NSE’s Year-to-Date gain, as it reduced to 10.10%. Market capitalization, YTD, climbed to N2.68tr, representing a 17.23% growth over the year’s opening value.

Bullish Sector Indices
The sectoral performance indexes were bullish, except for the NSE Banking Index that closed lower by 1.19%, while the NSE Insurance index led the advancers, after gaining 0.51%, followed by Consumer and Industrial goods with 0.21% and 0.07%, while Oil/Gas closed flat.
Market breadth was almost flat, as advancers marginally outnumbered decliners in the ratio of 14:13, while market activities were mixed after volume traded increased by 140.6% to 444.04m shares, from the previous 186.27m units. Transaction value fell by 4.7% to N3.35bn from the previous day’s N3.54bn. The day’s volume was driven by transactions in Veritaskapital Assurance, Zenith Bank, Guaranty Trust Bank, UBA and FCMB.
Nahco and NPF Microfinance were the best-performing stocks, gaining 9.80% and 9.73% respectively to close at N2.69 and N1.24 per share, on earnings expectation and market forces. On the flip side, Unilever and Eterna lost 9.97% and 9.52% respectively, closing at N15.80 and N2.85 on the unimpressive Q4 numbers and profit-taking.

Market Outlook
We expect the mixed performance to continue in the midst of profit-taking and positioning by investors taking advantage of the pullbacks, even as players interpret and analyze the impact of last week’s CRR adjustment, ahead of the full-year earnings reporting season. This is also against the backdrop that capital wave in the financial market may change in the midst of the unstable economic outlook for 2020.
Also, investors and traders are positioning in anticipation of the 2019 full-year earnings reports, amidst the changing sentiments in the hope of improved liquidity and positive economic indices which had pushed the market out of the bearish zone.
We see investors focusing on the upcoming of the full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.

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 New Year.
This was noted in the 10 golden stocks and trading ideas for 2020, as discussed extensively during the Investdata 2020 Traders & Investors Summit held in Lagos last December.
Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, the CBN directives and their impact on the economy in the nearest future.
Meanwhile, the Investdata team welcomes you to a bullish 2020. The home study packs of Invest 2020 Opportunities and Trade Ideas Summit containing the 10 Golden Stocks for 2020 are available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.

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/2020/01/indicators-turn-red-as-investors-take-profit-reprice-assets-balance-portfolio/