NSE Index To Breakout Bearish Channel On Dividend Stocks Rally, Inflow From Low Money Market Rates.

Thursday’s trading on the Nigerian Stock Exchange had a very volatile session to extend its positive outlook on increased buying interest among the large companies shares and other stocks to push the composite index higher on a low traded volume and positive sentiments despite the relatively improved transactions. 

 This move was further boosted by impressive 2019 full year and first-quarter earnings reports that were released so far during the week. Nevertheless, just as we noted in our previous updates that the pullback will not last due to expectations of more corporate earnings and qualification dates of many blue-chip stocks in this month of May will attract inflow to the market as players position for the dividend, especially as the yields remain high as a result of recent losses suffered by these companies.

Where Treasury Bills rates stayed low at 3.84% for 364 days despite the oversubscription witnessed in the last auction. This liquidity will find its way to these high yield stocks as their adjustment dates come closer. Total Nigeria Plc announced a dividend of N6.71 for its shareholders, while Law Union & Rock Insurance made available its Q1 result to the market. 

The market is already approaching another breakout from the recent bearish channel as revealed by the chart above, on a strong buying sentiment.  It also shows a buy point for many stocks amid two moving average crossings each in a recovery move of the market lead performance indicator, after three days of pullbacks on profit-taking and price correction. To stay ahead of this changing market dynamics and economic reset, get our home study packs, videos, and stock trading materials to take advantage of this recovery and realigned your portfolio with recession-proof stocks to protect your capital.

 Meanwhile, Thursday’s trading started on a green note which was sustained throughout the session on position-taking that pushed the NSE benchmark index to an intraday high of 23,892.92bps, from a low of 23, 709.20ps, before closing the day higher at 23,892.92ps.

 Market technicals were positive and mixed with volume transacted higher than the previous session, in the midst of positive breadth and strong buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a 'buy' volume of 100% and sell position of 0%. The total daily transaction volume index stood at 0.60.

The momentum behind the day’s performance stayed strong, with Money Flow Index reading 79.77points, up from the previous 74.86s, indicating funds are returning to some stocks and the market.

 Index and Market Caps

At the end of Thursday’s trading, the NSE All-Share index gained  183.48ps, closing at 23,892.92ps, from the opening level of 23,709.44ps, representing a 0.77% up, while market capitalization rose by N84.95 billion to close at N12.44 trillion, from the opening value of N12.36 trillion representing a 0.70%  appreciation in investors’ portfolios.

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 The day’s advancement was impacted by gains recorded by low, medium and high cap stocks, among which Nestle, Dangote Cement, Guaranty Trust Bank, Zenith Bank, UBA, FBNH, FCMB, Eterna, NPF Microfinance, May/Baker and Fidson.  This impacted positively on the NSE’s benchmark index, reducing its Year-To-Date loss to 10.99%, while market capitalization YTD decline stood at N517.18 billion, representing a 3.99% drop from the year’s opening level.



Bullish Sector Indices

All the sectorial indexes closed northward, except the NSE Insurance that closed lower by 1.92%, while NSE Consumer goods index led the advancers, after gaining 1.51%. It was followed by the NSE Banking and Industrial goods with 1.39% and 0.34% up respectively. While NSE Oil/Gas was flat for the session.

 Market breadth, remained positive as advancers outnumbered decliners in the ratio of 18:14, while market transactions in terms of volume and value were up by 18.08% and 56.02% respectively, as investors exchanged 182.74 million shares worth N2.33 billion from the previous day  159.24 million units valued at N1.68 billion. This volume was boosted by trades in Zenith Bank, Guaranty Trust Bank, FBNH, Custodian Investment and Fidson Healthcare. 

 The best-performing stocks for the day were Fidson Healthcare and NPF Microfinance gaining 9.62% and 9.46%, closing at N2.62, and N1.62 per share on earnings expectations and dividend payout of 20 kobos.  On the flip side, Custodian Investment and Unity Bank lost 9.52% each, closing at N5.70  and N0.44 per share respectively, on profit booking and selloffs



Market Outlook

Being Friday, we expect mid trend on profit-taking and positioning as players react 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 improved 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 will 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
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