NGSE: High Dividend Yield Continues To Attracts Buying Interests Among Institutional Investors

Market Update for June 1

Trading for the month of June started Monday on the Nigerian Stock Exchange (NSE) was volatile and mixed, with the benchmark All-Share index closing higher again on a low traded volume.

As the nation continues in the early stages of edging back into motion after the shutdowns occasioned by the deadly Coronavirus outbreak, the market seemed to resist the forces of profit taking as the bulls and bears continued to strive for dominance. Funds are flowing into the bond market as the Federal Government borrows to finance its 2020 spending plans owing to its weakened revenue base, suggesting that last week’s cut in Monetary Policy Rate will support the stock market once economic activities pick up  again.

The following companies were among those that released their 2019 full-year results: Dangote Sugar, Nahco Aviance, Jaiz Bank, Presco and ABC Transport, announcing dividends of N1.10, 30 kobo, 3 kobo, N2 and 3 kobo respective. These supported the positive sentiment for Consumer Goods and service sector stocks during the session.

Market recovery moves continue, confirming the bullish trend and suggesting that stocks which have suffered losses before now due to fear will rebound fast with the sectoral rotational trading pattern and normalcy returning to the economy. The airline and allied services providers seem to be attracting interests, after demonstrating some resilience as shown by the dividend payout and mild improvements in their numbers.

Meanwhile, Monday’s trading started in the green and pulled back by mid-morning before oscillating for the rest of the session on profit taking and positioning in some stocks, a situation that pushed the NSEASI to an intraday high of 25,396.10 basis points, from a low of 25,180.37bps, before closing the day higher at 25,321.29bps on a positive market breadth.

Monday market technicals were positive and mixed, as volume traded was lower than the previous session’s, with breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 65% and sell volume of 35%. Total daily transaction volume index stood at 0.87, just as momentum behind the day’s performance stayed strong, with Money Flow Index reading 87.78points, up from the previous 82.60ps, indicating entrance of funds to the market and some stocks.

Index and Market Caps

At the end of Monday’s trading, the NSEASI gained a marginal 53.47bps, closing at 25,321.29ps, from the 25,267.82ps it opened, representing a 0.21% growth, while market capitalisation rose by N25.19bn, closing at N13.19tr, from its opening value of N13.17tr which represented a 0.21% value gain in investors’ portfolio.

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The day’s advancement was impacted amidst gains recorded by BUA Cement, Guaranty Trust Bank, Zenith Bank, NB, Dangote Sugar, Vitafoam, and Nahco among others which impacted mildly on the NSE’s benchmark index, reducing Year-To-Date loss to 5.67%. Market capitalization YTD gains stood at N235.21bn, representing a 1.82% up from the year’s opening level.

Mixed Sector Indices

The sectorial performance indices were largely bullish, except for the NSE Insurance that closed -0.93% lower, while the NSE Banking index led the advancers after gaining 1.28%, followed by Consumer and industrial Goods indexes with 1.13% and 0.53% respectively, while NSE Oil/Gas closed flat.

Market breadth remained positive as advancers outpaced decliners in the ratio of 28:10, while transactions in volume and value terms dropped by 22.21% and 40.87% respectively, with investors trading 252.31m shares worth N2.65bn, from the previous day’s 325.61m units valued at N4.48bn. This volume was driven by trades in FBNH Holdings, Guaranty Trust Bank, Japual Oil, Zenith Bank and Regency Alliance Insurance

Nahco and Japaul Oil were the best-performing stocks for the session which gained 10% each, closing at N2.75 and N0.22per share respectively on dividend news and market sentiment. The gains by Japaul, the highest in recent history followed positive investor reactions to its 2019 audited financials which showed a huge N40.917bn net profit on asset stripping as part of efforts to make the company more efficient if the tempo is sustained (READ MORE).

On the flip side, Fidson Healthcare and Stanbic IBTC lost 9.7% and 9.2% respectively, closing at N3.07 and N32.50 per share respectively on profit taking and market forces.

 Market Outlook

We expect the mixed trend to continue, despite profit-taking, as investors positioning reveals confidence among the market players while implying that opportunities are still available before the Q2-driven earnings expectation. Also, sectors that have suffered oversold offer attractive risk-reward buy opportunities and outlook for consideration ahead of the Q2 economic and corporate data.

While investors digest the impact of the MPR cut from 13.5%, corporate earnings and economic activities, the MFI is showing improved institutional investors activity in the midst of the oscillating oil prices, amidst the rising new cases of the coronavirus with the number of infected people crossing 10,000 and deaths above 280.

However, the market’s high dividend yield continues to attract buying interests, while more audited and unaudited 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.

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https://investdata.com.ng/ngse-high-dividend-yield-continues-to-attracts-buying-interests-among-institutional-investors/