Mixed Session Still On NGSE, As Investors Grapple With Realities Of Remote Trading

Market Update for March 26
Volatility and mixed trading continued Thursday on the Nigerian Stock Exchange as the benchmark index closed marginally higher, halting the previous session’s loss on low volume traded that reflected the level of indecision among traders. There is also the effects of the remote trading, following the closure of the trading floor as a safety measure in the wake of the ravaging Coronavirus pandemic that has made governments shut down non-essential services across the globe. Many stockbroking firms and their clients, especially those that have not perfected the act of remote trading, are struggling to execute trades from remote platforms, due to either inefficiency of their platforms, or a failure to give real online trading education to their clients before now.

The number of Coronavirus cases in Nigeria has increased to 65, with the world recording slightly above 500,000 cases and over 22,000 deaths to the virus that has so far devastated economies and markets, putting the globe on panic mode.
Bargain hunting in many markets across the world have been due to low valuation and expected impact of stimulus packages from central banks and governments to cushion the effects of the virus on businesses and individuals, like factories, airports, schools, and churches remain shutdown to curtail the spread of the deadly disease.

In the same way, the buying interest in Nigeria’s financial services stocks has resulted from low price attractions and high dividend payouts and yields among the banks, the recapitalization of insurance companies and the intrinsic value in some of the insurance stocks. The current prices provide ‘buy’ opportunities for short, medium and long-term investors who understand the power of timing in equity investment.
Meanwhile, Thursday’s trading started on the upside at the opening bell which was sustained midday before oscillating in the early afternoon on selloffs in large companies. Irrespective of the sell-down, the NSE index hit an intraday high of 21,903.00 basis points, from its low of 21,696.88bps, before closing the day higher at 21,757.47bps on positive breadth.

Market technicals for the session were positive and mixed, as volume traded was lower than previous day’s with breadth favoring the bulls, amidst a high selling pressure as revealed by Investdata’s Daily Sentiment Report, showing ‘sell’ volume of 71%. ‘Buy” position stood at 29% on a total daily transaction volume index of 0.39, just as the impetus behind the day’s performance was seriously weak, despite Money Flow Index inching up to 8.91 points, from the previous session’s 6.65bps, indicating that funds entered the market and some stocks.

Index and Market Caps
At the close of trading on Thursday, the composite NSE All-Share Index gained 27.99bps, closing at 21.757.47ps, from its opening figure of 21,729.48ps, which represented a 0.13% rise, just as market capitalization gained N15.2bn, closing at N11.34tr from the N11.32tr it opened, which also represented 0.13% appreciation in value. BOC Gases and Sterling Bank announced dividends per share of 30 kobo and five kobo respectively.
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The day’s upturn was impacted by bargain hunting in stocks like Guaranty Trust Bank, Zenith Bank, Access Bank, UBA, UBN, ETI, and Honeywell, which impacted mildly on the NSE index, reducing its Year-To-Date loss to 18.94. Market capitalization loss YTD stood at N1.62tr, representing a 12.58% 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 5.99% and 1.89% higher, while the NSE Consumer Goods led the decliners after losing 4.64%, followed by the NSE Oil/Gas and Industrial goods which were down by 0.21% and 0.16% respectively.

Market breadth remained positive as advancers outnumbered decliners in the ratio of 24:8, just as market transactions in volume and value terms were down by 26.26% and 15.72% respectively after investors exchanged 172.16m shares worth N1.89bn from the previous day’s 233.47m units valued at N2.24bn. Volume was driven by trades in Zenith Bank, UBA, Stanbic IBTC, FCMB, and Access Bank.
Morison Industries and UBN were the best-performing stocks for the session, topping the advancers table with their gain of 10% each, closing at N0.55 and N6.56 per share on market forces. On the flip side, Nestle Nigeria and GSK lost 10% and 7.89% respectively, closing at N765.00 and N3.50 respectively on selloffs.

Market Outlook
We expect mixed performance to continue, being the last trading day of the week as market players cash in on low prices to position ahead of the expected impact of the stimulus package on the economy in the midst of dividend payment by the companies that postponed their Annual General Meetings. 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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