Investors Go For Strong Upside Potentials, Fundamentals Selling Below Book, Fair Value

Market Update for February 5
The Nigerian stock market was dragged further down at midweek, maintaining its bearish stance for the eighth consecutive session after highly capitalized stocks suffered huge losses on continued selloffs by investors repositioning their portfolios and taking advantage of the pullbacks to position in high dividend-paying stocks.
The first financial year ended December 31, 2019, audited result for the season was presented by Infinity Trust Mortgage Bank during the trading session, along with the declaration of 0.035 kobo (three and a half kobo) dividend. This ushered in the all-expected dividend announcement expected to trigger buying interests again as more early filers release their audited accounts and corporate actions in the coming days and weeks. Also on Wednesday, the board of SUNU Assurances presented its plan for a share reconstruction to be followed by fresh capital raising programme for N8bn in its bid to meet the new regulatory minimum for it to continue in business (READ MORE)

There is also the expected large volume of funds from maturing Central Bank of Nigeria Open Market Operation and Treasury Bills, that will likely further crash money market rates, and in the process trigger profit-taking in fixed income instruments like bonds and commercial paper. This is because investors may not rollover their positions, but hold cash or look the way of equity market for the short-term, especially now that the earnings season has kicked off.
Despite the continued and even significantly high volatility and mixed performance in the market, players still see value and upside potentials in equities with strong fundamentals and selling below their book and fair value.

The global markets unexpectedly rebounded in the midst of geopolitical uncertainties and slowdown in the Coronavirus saga, even as the Nigerian market has strong potentials to rebound, suggesting that investors should not panic but watch the market.
Meanwhile, Midweek’s trading started on the upside until mid-morning when it pulled back and oscillated between midday and afternoon on selloffs and profit-taking in non-financial sectors, amidst repositioning which pushed the composite NSE All-Share index to intraday low of 28,032.33 basis points, from its high of 28,506.63bps. It thereafter retraced up slightly, before closing lower at 28,093.76bps on a high traded volume.
Wednesday’s market technicals were negative and mixed, with volume traded higher than the previous session’s in the midst of negative market breadth and selling pressure as revealed by Investdata Sentiment Report showing 87% ‘sell’ volume and 13% ‘buy’ position. The day’s total transaction volume index stood at 1.00, while the momentum behind the day’s performance was weak, as Money Flow Index fell to 24.84 points from the previous day 34.18point, indicating that funds exited the market and some stocks.

Index and Market Caps
At the close of midweek’s trading, the benchmark index NSEASI lost 338.51bps, closing at 28,032.23bps from its 28.432.27bps opening, representing a 1.19% decline, just as market capitalization shed N174.37bn, closing at N14.47tr, from an opening value of N14.65tr, representing a 1.19% depreciation in value.

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The day’s decline was driven by selloffs and profit-taking in Dangote Cement, 11 Plc, Nigerian Breweries, Conoil, UACN, FBNH, Oando, and ETI, among others, which impacted negatively on the NSE’s Year-To-Date gain, reducing it to 4.66%. Market capitalization, YTD, dropped to N1.23tr, representing 11.89% growth over the year’s opening value.

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Banking and Insurance Indexes that closed 1.46% and 0.63% higher respectively, while the NSE Oil/Gas led the decliners after losing 2.19%, followed by Industrial and Consumer Goods with 1.63% and 1.37% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 21:18, while market activities in volume and value traded rose by 37.4% and 40.7% respectively to 350.21m shares worth N4.28bn, from the previous day’s 254.86m units valued at N3.04bn. Volume was driven by transactions in Zenith Bank, FBNH, FCMB UBA, and Ecobank Transnational Incorporated.
Union Bank of Nigeria and Law Union Insurance were the best-performing stocks of the session, gaining 9.85% and 9.52% to close at N7.25 and N0.92 per share, on market forces and sentiments. On the flip side, Conoil and National Salt suffered the biggest losses, shedding 10% each while closing at N18.00 and N13.50 on profit-taking and selloffs.

Market Outlook
We expect a change in trend, despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying in the dip ahead of dividend news and declaration. This is also against the backdrop of the fact that capital wave in the financial market may persist 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 may reverse the current trend.
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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