NGSE Indicators Slide Further, On Weakening Confidence, Poor Liquidity

Market Update for February 25
Once again, the composite All-Share index of the Nigerian Stock Exchange (NSE) extended its losing streak and negative sentiment on Tuesday, although with less intensity, closing lower, amidst the continued selling pressure among large-cap stocks. The index suffered the third straight negative session even as early filers continued to present their audited score-cards to the market.
One such score-card was Africa Prudential Plc’s 2019 audited financials, with net earnings decreasing to N1.68 billion from N1.95 billion in 2018, just as the gross earnings were down to N3.90 billion in 2019 from N4.49 billion in 2018. The directors of the company has recommended a dividend of 70 kobo for its shareholders from an earnings per share of 84 kobo, which translates to a yield of 14.28% as of the released date (READ MORE).
Technically, the NSE’s index action shows a market decline all these days, but now it is sitting on a key support level that might be a breakdown, or reversal, depending on market forces today. We have observed that the index movement has broken down the first support line and is now on the second support line of 27,033.10 basis points, any further breakdown of which will lead to the next support level at 26,189.80bps.
Looking at the state of the economy, especially the fundamental flaws caused by the heightened insecurity challenge within the country, it is not certain that the bulls will help the market before the said support.

Nevertheless, we expect some level of positive response to dividend news, following which we believe that taking advantage of low priced equities presented by the long bearish moves is a wise investment decision.
Meanwhile, Tuesday’s trading started on the upside and oscillated in the green into midday, before pulling back between early and late afternoon on selling pressure that dragged down the NSE index to intraday low of 27,031.71bps, from its high of 27,105.46bps. Thereafter, it inched up slightly but closed the day lower at 27,033.10bps on a low traded volume.

Market technicals for the session were negative and mixed, with volume traded lower than the previous session, on a negative breadth and high selling pressure as revealed by Investdata’s Sentiment Report showing 98% ‘sell’ volume and 2% ‘buy’ position. The total transaction volume index stood at 0.86, but the energy behind the day’s performance was absolutely weak, despite a marginal rise in Money Flow Index to 4.15points, from the previous day 4.02points. This is an indication that the market is lacking in liquidity, amidst the persistent selloffs.

Index and Market Caps
At close of the session, the NSEASI shed 7.93bps, closing at 27,033.10bps from its 27.041.03bps opening, representing a 0.03% drop, just as market capitalization lost N4.13bn, closing at N14.08tr, from the N14.09tr opening level, which also represented a 0.03% value loss.
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The session’s downturn was impacted by selloffs in small, medium and large company stocks like Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, and Honeywell, which further cut the NSE’s Year-To-Date gain to 0.71%, while market capitalization YTD gain fell to N1.12tr, representing 8.68% growth over the year’s opening value.

Mixed Sector Indices
The sectorial performance indexes were largely bearish, except for NSE Banking that closed 0.11% up, while the NSE Insurance index led the decliners after shedding 2.03%, followed by NSE Consumer Goods which lost 0.38%, while Industrial Goods and Oil/Gas indexes were flat.
Market breadth was negative, with decliners outnumbering advancers in the ratio of 22:8, while market transactions in terms of volume and value traded were down by 43.66% and 51.64% respectively as stockbrokers crossed 241.71m shares worth N3.55bn, from the previous day’s 429m units valued at N7.3bn. This volume was driven by trades in Zenith Bank, Guaranty Trust Bank, UBA, Transcrop and UPDCREIT
Law Union Insurance and Cadbury were the best-performing stocks during the session, after gaining 10% and 9.76% respectively, closing at N0.88 and N9.00per share on market forces. On the flip side, SFSREIT and SKYAVN lost 9.94% and 9.75% respectively to close at N69.30 and N2.13 on profit-taking and selloffs.

Market Outlook
We expect the losing momentum to moderate on dividend news and resist further decline as more audited earnings hit the market any moment from now. This is despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying increasing positions in high dividend-paying stocks ahead of dividend declaration. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation and 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 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.

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 our 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.

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