Mixed Intraday Trend May Continue On NGSE, Amidst Cautious Trading, Short-term Profit Taking

Market Update for April 8
Equity prices on the Nigerian Stock Exchange at midweek continued its upward trend for the second day as buying interests in banking stocks and other large company shares ahead of their first-quarter earnings reports. This is even as the Coronavirus cases in Nigerian remained on the rise as testing continues to trend higher.

The seeming market rebound started on Tuesday with strong gains, which was sustained on Wednesday despite being at a slower pace. The majority of the sectorial indexes were up, closing the session higher. It is clear that low price attraction and dividend news have attracted investors back to the market in the midst of the ongoing coronavirus pandemic as crude oil prices oscillate ahead of Thursday’s meeting of the Organisation of Petroleum Exporting Countries to agree on production cut or not. Already, the global lockdown has affected the demand and consumption of oil with many factories across the world shut down.

Nigeria’s Minister of Finance has hinted on the progressive stimulus package that is currently being considered for the benefit of Nigerians and the economy but is yet to provide details of how over N2tr has been distributed to ‘vulnerable Nigerians’ as part of the administration’s Social Intervention Programme as palliative. On the strength of this, many Nigerians are already worried about how corporate organization and small scale businesses will benefit from the N500bn crisis intervention fund currently being proposed to the National Assembly. And other fiscal measures put in place by the government to ensure that the ripple effects of the global pandemic are curtailed.

There is no doubt that the Nigerian equity market is still suffering from the unfavourable effects of COVID-19, as investors continue to play safe, despite the very attractive equities prices and yields on offer at this time. The truth remains that, many funds are currently trapped by the bear, while few traders with capital are taking advantage of the induced decline in share prices. The most intelligent investment decision is to avoid panic selling at this time.

Midweek’s, trading opened on the exchange in green and was sustained throughout the session as positive sentiment for shares of financial service providers and manufacturing stocks pushed the key performance index to break out the 21,000 psychological level. It touched intraday highs of 21,150.01 basis points, from its low of 20,925.19ps, before finishing the session higher at 21,073.26bps on above-average traded volume.

Wednesday’s market technicals were positive and mixed as volume exchanged were lower than the previous day, as market breadth favored the bulls on mixed sentiment as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 66% and sell position of 34%. This was on a total daily transaction volume index of 0.77, just as momentum behind the day’s performance was seriously weak, despite Money Flow Index moving up to 17.40points, from the previous session’s 9.26ps, indicating that funds entered the market.

Index and Market Caps
At the end of trading, the NSE’s composite All-Share index gained 148.07bps, closing at 21,073.26 after opening at 20,925.19ps, representing a 0.71% up, just as market capitalization rose by N77.17 billion to N10.98tr, from the N10.91tr it opened, also representing a 0.71% appreciation in investor’s portfolio.

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The midweek rally was impacted by buying interests in medium and large companies stocks like MTNN, Nestle, Guaranty Trust Bank, Zenith Bank, UBA, Lafarge Africa, Stanbic IBTC, Flourmills, Dangote Sugar and Ikeja Hotel that impacted positively on the NSE index, by reducing its Year-To-Date loss to 21.33%. Market capitalization YTD decline stood at N1.88tr, representing a 15.13% drop from the year’s opening value.

Bullish Sector Indices
All the sectorial performance indexes were in the green, except for the NSE Oil/Gas Index that closed 0.55% down, while the NSE Banking index led the advancers after gaining 2.07%, followed by the NSE Consumer Goods, Industrial Goods, and Insurance that closed 0.99%, 0.97% and 0.14% up respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 25:8, just as market transactions in volume and value were down by 75.99% and 6.34% respectively, with investors exchanging 346.41m shares worth N5.22bn as against the previous session’s 1.44m units valued at N5.57bn. Volume was boosted by trades in Guaranty Trust Bank, FBNH, Zenith Bank, Lafarge Africa, and Fidelity Bank.
ETI and Ikeja Hotel were the best-performing stocks for the day, gaining 10% each closing at N4.40 and N0.99 per share on low price attraction. On the flip side, Skypower Aviation and Union Diagnostic lost 10% each, closing at N2.16 and N0.27 per stock, on profit-taking.

Market Outlook
We expect the mixed intraday trend to continue, as short term profit taking from this few sessions of a rally is underway. Just as market players’ take strategic positions ahead of Q1 2020 earnings reports and impacts of the stimulus package on the economy. Also, more companies are notifying the exchange and investors of their virtual annual general meetings and closed period for 2020 first-quarter earnings reports.

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 selloffs, with investors buying to increase their 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.
Meanwhile, 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.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
amberose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467

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