Mixed Session Ahead, As Investors Position For 2020Q1 Earnings, Impact Of Stimulus Packages

Market Update for March 30
Panic selling again resurfaced on the Nigerian Stock Exchange on Monday as the key performance indicators closed lower on negative sentiment and low traded volume ahead of the 14-day lockdown of two states of Lagos and Ogun, as well as the Federal Capital Territory, Abuja, as part of measures to check the spread of the Coronavirus (Covid-19).
Monday’s loss wiped out the previous sessions seems gains, amidst weak sentiment and indecision among players, which dampened the day’s performance as investors sold off positions in high cap stocks especially in the banking sector that recorded gains last week. The attempted recovery failed to follow through on the ravaging coronavirus that had upset stock markets and economies across the world.

The loss also occurred on a day new cases of Covid-19 in Nigeria increased to 131, with a second death recorded also on Monday.
The ongoing capital outflow from the emerging and frontier markets is due to the imminent global recession as the benchmark indexes of many stocks markets, are down by over 20% since February. In Nigeria, owing to Monday’s decline, the market has lost 18.6% and 20.5%, Month-to-Date and Year-to-Date respectively.

The market’s outlook remains unstable during this lockdown period and beyond, due to the notably high volatility in developed and developing markets, the seeming positive sentiment on quarter-end window dressing and the bouquet of stimulus packages have been unable to support the market. There is no clear road map for implementing these fiscal and monetary measures and ensuring that it is devoid of the usual bottlenecks, or even ensuring that the stimulus package unveiled by the Central Bank of Nigeria (CBN) gets to the end-users seamlessly.
Meanwhile, Monday’s trading opened on the downside in the morning and was sustained throughout the session as selloffs hit large companies, irrespective of the seeming undervalued prices. This pushed the NSE’s benchmark index to an intraday low of 21,330.79 basis points, from its high of 21,828.65bps, before closing the session lower at 21,330.79bps on a negative breadth.

Monday’s market technicals were negative and mixed, as volume traded was higher than previous day’s in the midst of breadth that favoured the bears, and high selling pressure as revealed by Investdata’s Daily Sentiment Report, showing ‘sell’ volume of 100%. ‘Buy” position stood at 0% on a total daily transaction volume index of 1.03, just as momentum behind the day’s performance was seriously weak, despite Money Flow Index inching up to 12.19 points, from the previous session’s 11.88ps, indicating that funds entered the market and some stocks, despite the down market.

Index and Market Caps
At the end of trading on Monday, the NSE’s All-Share Index lost 530.99bps, closing at 21.330.79ps, from its opening figure of 21,861.78ps, which represented a 2.43% decline, just as market capitalization shed N276.73bn, closing at N11.12tr from the N11.39tr it opened, which also represented 2.43% depreciation in value.

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The session’s downturn was impacted by selloffs and profit-taking in stocks like MTNN, Guaranty Trust Bank, Zenith Bank, Access Bank, UBA and FBNH which impacted negatively on the NSE index, increasing its Year-To-Date loss to 20.55%. Market capitalization lost YTD stood at N1.82tr, representing a 14.84% decline over the year’s opening value.

Mixed Sector Indices
The sectorial performance indexes were largely bearish except for the NSE Oil/Gas and Industrial goods that closed 1.77% and 0.01% higher, while the NSE Banking led the decliners after losing 3.62%, followed by the NSE Consumer Goods and Insurance which were down by 0.92% and 0.52% respectively.
Market breadth turned negative as decliners outnumbered advancers in the ratio of 15:11, just as market activity in volume and value were mixed as traded volume was up by 85.55% to 466.91m shares from the previous day’s 251.41m units, while value was down by 42.56% to N1.93bn from Friday’s N3.36bn. This volume was driven by trades in Meyer, Champion Breweries, Zenith Bank, UBA and FBNH.
The best-performing stocks for the session were Berger Paints and 11 Plc that chalked the advancers’ table with gains of 9.84% and 9.83% respectively, closing at N6.70 and N160.90 per share on market forces. On the flip side, MTN Nigeria and Wema Bank lost 10% and 9.62% respectively, closing at N90 and N0.47respectively on selloffs and profit-taking.

Market Outlook
We expect mixed intraday performance to continue, as two weeks trading sessions remain unclear till midweek to confirm direction, with market players are likely to position ahead of Q1 2020 earnings reports and impact of the stimulus package on the economy in the midst of dividend payment by the companies that postponed their Annual General Meetings and others.

However, the 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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