Investors Focus On Full-Year Earnings Reports, Target Strong Growth Potentials

Market Update for January 8

The bull ascendance on the Nigerian Stock Exchange continued at the midweek despite the mixed trading and profit-taking by day traders as the composite index jumped higher, crossing the psychological line of 28,000 points to test 28,562.48 basis points on a strong buying interest in low, medium and stocks. It, therefore, recorded the highest daily gain in two years, surpassing the May 22, 2019, single-day gain of 2.9%.
The market’s year-to-date gain soared to 6.41%, which has made the NSE join the world’s top-performing exchanges in the New Year, as local institutional investors and fund managers take advantage of the NSE’s two consecutive years of decline while repositioning their portfolios as equities assets remain undervalued ahead of expectations for the New Year and positive macroeconomic indices with the economy continuing to recover, just as dividend yields of listed companies stayed relatively higher than the prevailing money market rates and fixed income instruments. Also, capital wave in the financial market continues to look for windows with higher returns.
The ongoing rally has been sustained as smart money is not selling its remaining position yet, ahead of the 2019 full-year earnings reporting season that kicks off in February. Already, an increasing number of companies are notifying the investing public of their closed periods and dates of board meetings to approve their 2019 financials.
Historical data has shown the relationship between crude oil price movement and equity prices, helped by the escalating conflict between the US and Iraq, even as commodity prices respond to the oil price rebounded. The question then remains: Will Iran be the catalyst to push oil price to $100 per barrel? Maybe. Remember, oil was trading north of $100 in the summer of 2014. By November, prices were sub-$80, and the table was set for OPEC to cut production and stabilize oil prices. They refused, triggering a crash in oil prices that ultimately sent oil prices down to $26. OPEC’s strategy: Kill off the emerging threat of the U.S. shale industry by forcing prices well below where they could produce profitably.
Meanwhile, midweek’s trading started on the upside and was sustained throughout the session, regardless of profit booking as position-taking continued pushing the NSEASI to an intraday high of 28,562.48bps, from its low of 27,597.57bps, before finally closing the day higher on a high traded volume.
Market technicals for the day were positive and strong, as volume traded was higher than the previous session, in the midst of market breadth favoring the bulls and strong demand for stocks as revealed by Investdata’s Sentiment Report of 100%; volume and 0% sell position.
The day’s total transaction volume index stood at 2.68.  The energy behind the day’s performance was strong, just as Money Flow Index read 71.10points, from the previous 67.08bps. This is an indication that money entered some stocks and the market at large, despite profit-taking.

Index and Market Caps

The All-Share index for the session closed higher with 975.55bps, closing at 28,562.48bps from the 27,586.93bps, representing 3.54% growth, just as market capitalization rose by N470.9bn to N13.79tr, from an opening value of N13.32tr, which also represented a 3.54% value gain.
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The session’s advance was due to buying interests in high cap stocks like Dangote Cement, MTNN, Guaranty Trust Bank, Okomu Oil Zenith Bank, FBNH, UBA, Access Banks, ETI, Presco, Flour Mills, Transcorp, and PZ Cussons, among others. All of these impacted positive on the NSE’s Year-to-Date gain, rising to 6.41%. Market capitalization YTD also stood at N828.79bn, representing a 6.41% growth over the year’s opening value.

Bullish Sector Indices

All sectoral performance indices were bullish, while the NSE Industrial Goods index led the advancers, after gaining 6.07%; followed by the Banking Index’s 3.87% gain; while the NSE Insurance, Consumer Goods and Oil/Gas climbed 2.72%, 0.36%, and 0.17% higher respectively.
Market breadth remained positive as advancers outweighed decliners in the ratio of 38:9, while market activities were up, with volume improving by 66.98% as investors exchanged 741.82m shares worth N9.22bn from the previous day’s 446.38m units valued at N5.82bn. The day’s volume was driven by UBA, Zenith Bank, Access Bank, FBNH and Transcorp.
FBNH and Union Diagnostic were the best-performing stocks for the day, as they gained 10% each to close at N7.70 and N0.22 respectively, on market sentiment and market forces. On the flip side, Triple Gee and Thomas watt lost 9.38% and 7.89% respectively, closing at N0.58 and N0.35 on market forces and selloffs.

Market Outlook

We expect a mixed performance on profit-booking and position-taking as investors take advantage of low prices, ahead of economic data and portfolio managers repositioning for the New Year. This against the backdrop of the fact that the 364-day Treasury Bills rate fell to 5.2% while saving the bond rate stood at 7.14%.
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 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.
Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, CBN directives and its 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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