Mixed Performance, As Cautious Investors Interpret Emerging Economic, Corporate Data

Market Update for April 22

The composite index of the Nigeria Stock Exchange (NSE), at the close of midweek’s trading, despite the wobble in oil prices in search of relative stability after triggering selloffs in many markets of the world. The positive earnings news from Guaranty Trust Bank, FBN Holdings, United Capital, Wema Bank, Cadbury, and Nigerian Breweries impacted the market positive, despite the mixed sentiment in the economy.

These corporate earnings have given an insight into what should be expected from quoted companies for the 2020Q1 operating period, while pointing out how investors should position, going forward. The 2020Q1 numbers will tell whether the Q1 GDP data will decline or turn negative.

The continued daily rise in the number of Coronavirus (COVID-19) cases in Nigeria and the consequent lockdown for over a month so far, has signaled weak productivity, consumption, and others that will affect Q2 corporate earnings and economic data. This calls for a change in investment strategies in this changing market dynamics and recession, as well as knowing which sectors and stocks to target in this Q2 and beyond, so as not to be taken unawares by the unfolding economic realities.

The current oscillating trend amidst the divergence in market performance and economic situation, smart money continues to push prices up and down, while reviewing the emerging 2019 full-year and 2020 quarterly earnings reports.

This move is typical of a recovering market and should not result in any form of panic selling, but as we noted some days ago, should rather offer an opportunity for intelligent investors and traders who missed out in the earlier recovery moves to take advantage of any correction for realigning their portfolios. 

The money flow index has continued to look up from low 7.98 points on April 3, 2020, to 63.98 points, indicating that smart money is entering the market irrespective of the prevailing economic challenges. This suggests that market players should play the market knowledgeably to protect their investable capital.

Meanwhile, Wednesday’s trading started slightly on the upside in the early trading hours and oscillated throughout the session on buying interest in banking stocks and others. This pushed the NSE’s benchmark All-Share index to an intraday high of 22,799.78basis points, from its low of 22,629.92ps, before closing higher at 22,780.30bps on a very low traded volume.

Midweek’s market technicals were positive and mixed as volume traded was lower than the previous session, in the midst of breadth favoring the bulls, besides the high buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 89% and sell position of 11%. Total daily transaction volume index stood at 0.42, just as momentum behind the day’s performance inched up, with Money Flow Index reading 63.98 points, up from the previous 55.60ps, indicating that funds entered some stock and market.

Index and Market Caps.

At the end of midweek’s trading, the composite NSEASI gained 150.38bps to close at 22,780.30ps from the opening figure of 22,629.92ps, representing 0.66% gain, while market capitalization closed at N11.87tr from an opening value of N11.79tr which also represented a 0.66% value gain.

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The session’s upturn was driven by demands for shares of Guaranty Trust Bank, Lafarge Africa, BUA Cement, Zenith Bank, Access Bank, UBA, PZ, and NEM Insurance, which impacted positively on the NSE index. This reduced Year-To-Date loss to 15.13%, while market capitalization YTD stood to N1.15tr, representing a 7.65% drop from the year’s opening value.

Bullish Sector Indices
All the sectorial performance indexes closed higher, except for the NSE Consumer Goods that fell by 0.12%, while the NSE Banking index led advancers after gaining 2.78%, followed by the NSE Insurance that chalked 2.01%, while the Industrial Goods and Oil/Gas which inched 1.38% and 0.22% up respectively.

Market breadth, turned positive as advancers outnumbered decliners in the ratio of 19:4, just as activities in volume and value terms fell by 25.61% and 30.20% respectively, after investors exchanged 186.23m shares worth N1.85bn, from the previous day’s 250.35m units valued at N2.33bn. Volume was boosted by trading in Zenith Bank, FBNH, Guaranty Trust Bank, UBA, and Lafarge Africa.

NEM Insurance and Lafarge Africa were the best-performing stocks of the day after gaining 10% and 9.7% respectively, closing at N2.20 and N11.35 per share on the dividend declared and market forces. On the flip side, Sky Aviation and Union Diagnostic lost 8.29% and 6.5% respective, closing at N1.80 and N0.29 per share respectively, on selloffs and profit-taking.

Market Outlook
We expect mixed performance as profit and position-taking continued on a mixed sentiment ahead of more corporate earnings as smart money repositions their portfolios in the midst of crashing and oscillating oil prices.

However, the market’s high dividend yield continues to attract buying interests, while more audited corporate earnings hit the market going forward.

This is despite the likely continuation of selloffs, with investors buying to increase their positions in undervalued stocks ahead of dividend declaration and Q1 numbers. 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 different Stocks for various investment objectives in 2020 and beyond 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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