NGSE’s High Dividend Yield Attracts Buying Interests, Amidst Release Of More Audited Earnings

The composite All-Share index of the Nigerian Stock Exchange (NSE) turned slightly green at midweek on an increased buying interest in oil marketing and bunking stocks, halting the three previous days’ back-to-back sessions of pullbacks. This was just as investors took profit, while reacted positively to the recently released 2019 full-year and quarterly earnings reports with impressive numbers and corporate actions that beat market expectation.

Despite these selloffs, the seeming recovery in the stock market rally has come a long way from early April lows. This Wednesday’s flat performance, notwithstanding, the market is set to reverse up and continue to disconnect from the economic realities as the Coronavirus pandemic is driven economic reset comes with different challenges and opportunities that show who is a spectator and a player in equity investment.

Spectators are the fearful, doubtful, and distrusted investors or traders without goals or plans, while players have objectives, plans, strategies, and the play-for-profit motive with exit strategies at any time. In all, investors should adopt more a cautious stance, even when these pullbacks have offered some stocks breather.

More impressive corporate earnings have continued to hit the market with corporate actions. On Wednesday, Alico Insurance, NPF Microfinance, as well as May & Baker released their 2019 full-year audited results with one-for-five bonus, 20 kobos, and 25 kobos respectively, while Nestle, NEM Insurance, AXA Mansard, and Aiico released Q1 2020 unaudited accounts. The market also continues to react to the qualification and markdown dates of blue-chip companies with good dividend yields, in the midst of the sustained oil price oscillation amidst the easing of lockdown worldwide.

 Meanwhile, Wednesday’s trading opened slightly on the upside in the morning and oscillated throughout the day on the mixed sentiment of positioning and profit-taking that pushed the key performance index to an intraday high of 23,759.84bps, from a low of 23, 6695.90ps. Thereafter it closed the session marginally up at 23,709.44ps on positive breadth.

Midweek’s market technicals were positive and weak with volume traded slightly higher than the previous session, in the midst of breadth favoring the bulls and mixed sentiment as revealed by Investdata’s Daily Sentiment Report, showing a 'buy' volume of 21% and sell position of 79%. The total daily transaction volume index stood at 0.54. The impetus behind the day’s performance stayed strong, with Money Flow Index reading 74.86points, down from the previous 79.09s, indicating funds are gradually leaving the market despite closing flat.

 Index and Market Caps

The leading performance indicator at the end of Midweek’s trading was slightly up by 13.34ps, closing at 23,709.44ps, from the opening level of 23,685.90ps, representing a 0.06% flat, while market capitalization inched up by N7.01bn to close at N12.36tr, from the opening value of N12.35tr representing a 0.06% value gain.

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The day’s upturn was impacted by gains recorded by low, medium, and high cap stocks, among which Total Nigeria, 11 Plc, Unilever, Stanbic IBTC, Guaranty Trust Bank, Zenith Bank, UACN, NPF Microfinance, May/Baker and others. This impacted mildly on the NSE’s benchmark index, increasing its Year-To-Date loss to 11.67%, while market capitalization YTD decline stood at N602.13bn, representing a 4.64% drop from the year’s opening level.

Bullish Sector Indices

All the sectorial indexes closed higher, except the NSE Industrial Goods that closed flat, while NSE Oil/Gas index led the advancers, after gaining 2.66%. It was followed by the NSE Insurance, Banking and Consumer Goods with 1.92%, 0.63% and 0.39% up respectively.

 Market breadth, was positive as advancers outweighed decliners in the ratio of 20:8, while market activity in terms of volume and value were mixed as volume was slightly up by 2.24% as investors traded 159.24m shares from the previous day’s 155.75m units, while the value of transactions slides down by 8.33% from N1.68bn on Tuesday, to N1.54bn. Volume was driven by trades in FBNH, Access Bank, UBA, Regency Insurance, and Zenith Bank.

 Unilever and 11 Plc were the best-performing stocks, gaining 9.96% and 9.94%, closing at N12.70, and N176.90per share on market sentiment and earnings expectations. On the flip side, Jaiz Bank and Union Diagnostic lost 6.45%% each, closing at N0.58 and N0.29 per share respectively, on profit booking.

 Market Outlook
We expect uptrend as profit-taking slows down on positive reaction to impressive corporate earnings and dividend payout, as the dates for dividend qualification of blue-chip companies draw nearer ahead of more corporate earnings and the 2020Q1 GDP, even as MFI reveals that smart money activity in the midst price correction and rising cases of the virus spread and oscillating oil prices after the crash.

 However, the market’s high dividend yield continues to attract buying interests, while more audited corporate earnings hit the market, going forward, despite the likely continuation of selloffs. Investors are 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 markets 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 amidst the changing sentiments in the hope of improved liquidity and positive economic indices that may reverse the current trend. We see investors focusing on the upcoming full-year earnings season, targeting companies with strong potentials to grow their dividend on the strength of their earnings capacity.

Again, the current undervalued state of the market offers 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 going forward.

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.

NB: 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, 0803205546`

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