Investors Focus On Audited Earnings, Target Stocks With Strong Growth Potentials, Dividends

Market Update for January 23
Equity prices on the Nigerian Stock Exchange returned northward on Thursday, halting two previous sessions of profit booking on increased buying interests in large companies which signaled their expectations that based on prevailing circumstances, members of the Central Bank of Nigeria’s Monetary Policy Committee could vote to retain the policy stance. This follows from the fact that the apex bank’s decision to stimulate the economy is yielding the desired result, except for the inflation rate partly influenced by the continued border closure and increased demand for goods and services during the yuletide.

With more companies notifying the exchange of their closed period and board meeting dates to approve the 2019 full-year financials, discerning investors are also taking the opportunities offered by the recent pullbacks to accumulate positions ahead of the earnings season expected to begin any moment from February.
Risk-averse investors have remained in the fixed income market, despite the seemingly negative return as a result of the inflation rate of 11.98% as of December.

Regardless of the mixed economic outlook, however, many stocks are set to soar into the earnings reporting season as market reaction to the fourth quarter 2019 economic recovery is expected to impact positively on corporate scorecards. This is also expected to result in impressive and even surprising quarterly earnings reports, while those with disappointing quarterly numbers will reduce as a result of improved Q4 2019 economic performance.

Thursday’s trading opened marginally on the upside and pulled back in the mid-morning before rebounding in midday to an afternoon on position taking in Industrial Goods and Oil sector that pushed the composite Index to an intraday high of 29,591.29 basis points from its low of 29,389.02bps. It then finished the day higher at 29,591.29bps on a low traded volume.

Market technicals for the session were positive and mixed, with volume traded lower than the previous session’s, in the midst of flat market breadth and strong buying pressure, as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ volume and 0% ‘sell’ position. The day’s total transaction volume index stood at 0.58, while the momentum behind the day’s performance remained strong, even while continuing to slide down. Money Flow Index read 71.84points, from the previous 73.50ps, an indication that funds entered the market and some stocks.

Index and Market Caps
At the end of Thursday’s trading, the benchmark NSE All-Share Index gained 133.08bps, closing at 29,591.29bps from the 29,458.29bps, representing a 0.45% up, just as market capitalization appreciated by N68.53bn, closing at N15.24tr, from an opening value of N15.17tr, which represented a 0.45% value gain.

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Thursday’s upturn was driven by buying interest in Dangote Cement, Seplat Petroleum, Lafarge Africa, BUA Cement, Oando, CAP, Unilever, Access Bank, and Fidelity Bank, among others, which impacted positively on the NSE’s Year-to-Date gain, as it increased to 10.24%. Market capitalization, YTD, climbed to N2.89tr, representing a 17.55% growth over the year’s opening value.

Bullish Sector Indices
The sectoral performance indexes were bullish, except for the NSE Insurance Index that closed lower by 1.77%, while the NSE Industrial Goods index led the advancers, after gaining 1.94%, followed by the Oil/Gas, Consumer goods and Banking with 1.53%, 0.37%, and 0.13% respectively.
Market breadth was at par, with decliners equal to advancers in the ratio of 14:14, while market activities were mixed, as volume traded dropped by 37.65% to 196.93m shares, from the previous 312.41m units, while value rose by 111.85% to N7.71bn from the previous day’s N3.54tr. The day’s volume was boosted by transactions in UBA, Access Bank, GTBank, and Zenith Bank.
Chemical Allied Products and Unilever were the best-performing stocks during the session, gaining 10% and 8.06% respectively to close at N27.50 and N19.45 per share, on dividend expectation and market forces. On the flip side, Linkage Assurance and Wapic Insurance lost 8.33% and 7.89% respectively, closing at N0.44 and N0.35 on profit-taking.

Market Outlook
Being the last trading day of the week, the prevailing mixed performance may continue in the midst of profit-taking and positioning by investors taking advantage of the pullbacks, even as investors await the MPC meeting’s outcome in the last hours of Friday’s trading and the full-year earnings reports of companies. This is also against the backdrop of the prevailing low-interest rate regime in the money market and mixed economic outlook for 2020, at a time the Presidential Economic Advisory Committee is yet to harmonize monetary and fiscal policies and give clear direction.
Also, investors and traders are positioning in anticipation of the 2019 full-year earnings reports, amidst 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

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