Expect Mixed Performance, Slowdown In Loss Momentum, As Investors Review Economic Data Impact

Market Update for March 17
Nigeria’s stock market again moved lower for the second consecutive session on Tuesday, after a failed attempt to retrace up as revealed by the trading pattern and mixed sentiments, before pulling back on high selloffs in medium and large-cap companies like Dangote Cement, Chemical Allied Products and NASCON Allied. This pushed the Nigerian Stock Exchange All Share Index to yet another lower low, despite the improved buying interest among market players on mixed economic data on a day the National Bureau of Statistics released the country’s February Consumer Price Index showing that inflation climbed higher to 12.20% from 12.13% in January.

As we observed on Monday and Tuesday, the panic selling in the market has slowed down even as the economic managers put measures in place to mitigate the negative impact of the Coronavirus (Covid-19).
We recall that in the case of the global financial crisis, the NSE index started strains of panic in March 2008, after touching an all-time high of 66,000 points on March 5. The market didn’t start feeling it until between late 2008 and early 2009 when the decision of the then Central Bank of Nigeria (CBN) governor, Mallam Sanusi Lamido Sanusi, when he began stress-testing the nation’s banking industry, resulting in the sacking of eight bank managing directors. This threw the banking industry and the economy into a full-blown crisis that depressing the stock market, from which the stock market finally bottomed out in 2011/2012.

The current Coronavirus-driven bear market and economic downturn that started two months ago have seriously impacted the global and local stock market setting off a panic over the last four-to-five days, pushing prices of crude oil to its recent lows. The bargain hunting in the last two trading sessions was driven by low price attraction and dividend news expectation, amidst more notification of board meetings ahead of the March 31, deadline for filling of 2019 financial year accounts.
Tuesday’s trading opened in the green and fluctuated in the midday to the afternoon on a mixed trading pattern that pushed the NSE composite index to an intraday low of 22,497.57 basis points, from its high of 23,008.57bps. Thereafter, it rebounded marginally before closing the session lower at 22,543.07bps on high traded volume.

Index and Market Caps
The benchmark NSEASI, at the end of the day’s trading, lost 162.12bps or 0.71%, closing at 22,543.07ps, from its opening figure of 22,705.19bps, just as market capitalization shed N84.49bn, closing at N11.75tr, from the N11.83tr opening value which also represented 0.71% depreciation in investors’ portfolios.
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The market’s decline was driven by selloffs in medium and high cap stocks like Dangote Cement, CAP, Ardova (formerly Forte Oil), NACON Allied, International Breweries, Champion and Lafarge Africa. This expectedly impacted mildly on the NSE, as Year-To-Date loss increased to 16.32%, while market capitalization YTD negative position stood at N1.89tr, representing a 9.83% decline over the year’s opening value.

Mixed Sector Indices
The sectorial performance indexes were largely bearish, except for the NSE Banking and Insurance that closed 5.59% and 0.85% higher respectively, while NSE Industrial Goods led the decliners, after losing 2.16%, followed by the NSE Oil/Gas and Consumer Goods, which lost 0.61% and 0.04% respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 27:12, while market transactions in terms of volume and value traded were up by 22.56% and 39.93% as investors traded 675.91m shares worth N8.6bn, from the previous day’s 551.48m units valued at N5.76bn. Volume was boosted by trades in Zenith Bank, Guaranty Trust Bank, FBNH, Access Bank and UBA.

Access Bank and Lafarge Africa were the best-performing stocks of the day that topped the advancers table, gaining 10% each, closing at N6.05 and N11.00 per share on market forces and expectation of earnings report. On the flip side, Dangote Cement and NASCON lost 10% each, closing at N139.70 and N8.55 respectively on sell down and profit-taking.

Market Outlook
We expect a mixed performance and slowdown on the losing momentum as investors and traders review the impact of the cocktail of economic data vis-à-vis the February inflation report released on Tuesday, as low stock prices and high dividend yields continue to attract buying interests, while more audited corporate earnings hit the market going forward. This is despite the likely continuation of the mixed intraday movement in the midst of selloffs, with investors buying increased positions in undervalued 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 undervalue 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.
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