NGSE Indices up On Oil Price Rise, As Investors Await Economic, Corporate Data

Market Update for June 8

Equity prices on the Nigerian Stock Exchange (NSE) closed higher on Monday to start the new week on a positive note, thereby short-living the two previous sessions of losses after bullish sentiments for blue-chip stocks were rekindled on positive earnings news and buying interests. There were sufficient to lift the composite NSE All-Share index higher on a low traded volume and mixed sentiment.

Technically, the market is still at its overbought region with less inflow of funds as revealed by Money flow index that is already looking down at 89.52, while the index action tries to breakdown the average moving indicator. Tuesday’s trading pattern had a bullish wedge formation and oscillating trend of higher highs and lows within a range, and signals indecision ahead of economic and corporate numbers.

As the sectoral rotation continues, stocks that had benefited from the economic changes and coronavirus pandemic also continue to rally, despite the wobbling situation, with the National Bureau of Statistics (NBS), at the weekend, reporting that 42% of Nigerians have, so far, lost their jobs due to the Coronavirus (COVID-19) pandemic and the resultant lockdowns that have triggered the ongoing global reset.

The rising crude oil prices on the back of the OPEC+ deal may have supported sentiments and helped to influence the day’s bull-run, especially as the current deal would extend output cuts and ensure tougher enforcement. These expectedly pushed oil prices above $40 per barrel for the first time in three months, before pulling back to around $38 which represented 2.2% decline in the recovery move. 

Meanwhile, Monday’s trading opened on the upside and was sustained till midday  before oscillating on renewed buying interests in high cap stocks and profit taking that pushed the NSE’s index to an intraday high of 25,412.54 basis points, from a low of 25,016.30bps, before finally closing higher at 25,250.20bps on a positive market breadth.

Market technicals were positive and mixed as volume traded was higher  than the previous session’s, in the midst breadth favoring the bulls  and  mixed  sentiment as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 59% and sell volume of 41%. Total daily transaction volume index stood at 0.79, just as the impetus behind the day’s performance stayed strong, with Money Flow Index reading 89.52points, flat from the previous 89.47ps, indicating low inflow into the market that call for caution buying at this point.

Index and Market Caps

At the end of Monday’s trading session, the composite index gained 233.90bps, closing at 25,250.20ps, from the 25,016.30bps it opened, representing a 0.93% growth, while market capitalisation rose by N121.9bn to N13.17tr from an opening value of N13.05tr, representing a 0.94% value gain in investors’ portfolio.

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The day’s upturn was impacted by gains recorded by MTNN, BUA Cement, NB, Guranty Trust Bank, Zenith Bank, Access Bank, UACN, Vitafoam, AIICO, and Neimeth Pharmaceuticals among others, which impacted mildly on the NSE’s benchmark index. This reduced the NSE’s Year-To-Date loss to 5.93%, while market capitalization YTD gains stood at N195.2bn, representing a 1.65% up from the year’s opening level.

Bullish Sector Indices

Performance indices across the sectors were bullish, except for the NSE Insurance that closed flat, while NSE Industrial index led the advancers, gaining 2.39%, followed by NSE Banking and Oil/Gas which were up by 1.09% and 0.24% respectively. Just as NSE Consumer goods rose marginally by 0.04%.

Market breadth was positive  with advancers  outpacing decliners in the ratio of 31:11, just as activities in volume and value terms were mixed with volume traded inching up by 3.68% to 222.39m shares from the previous day 214.5m units, while value was down by 16.84% to N2.09bn from Friday’s value of N2.51bn. This volume was driven by trades in FBNH, Guaranty Trust Bank, Japua lOil, UBA and Zenith Bank

Wapic Insurance and Fidson Healthcare were the best performing stocks of the day, gaining 10% and 9.80% respectively closing at N0.33 and N3.25 per share respectively on positive market sentiments. On the flip side, Japaul oil and Cornerstone Insurance lost 10% and 9.06% respectively, closing at N0.27 and N0.50 per share respectively on market forces and profit taking.

Market Outlook

The indecision noticed among traders, as well as the consolidation level will confirm the next market direction, despite profit-taking as investors position, revealing confidence among market players. This also implies that opportunities are still available before the Q2-driven earnings expectations. Also, sectors that have suffered oversold, so far, 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 cases 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.

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
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Tel: 08028164085, 08032055467
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