NGSE Index Rise Marginally, As Crude Prices Rebound, Ahead Of MPC Meeting

Market Update for July 15

The nation’s equity market at the midweek closed marginally higher, halting the two previous sessions of losses on the back of last minute buying interests in telecommunication, Consumer Goods and banking stocks.

This was despite the negative sentiments and lingering low market liquidity, even as crude oil prices in the international market rebounded on the hope that a Coronavirus vaccine may have been finally found, signaling the possibility of easing the lockdown and boosting consumption.

As market players continue to trade with caution ahead of the 2020Q2 corporate earnings season, economic data, as well as next week’s regular meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee, investors should look the way of companies benefiting from the prevailing economic condition. This suggests that sectoral rotation will persist as funds move to less volatile, defensive stocks and undervalued assets.

Midweek’s trading opened in the red and oscillated into the mid-morning and midday, before rebounding in the afternoon on demand for Airtel Africa shares and position taking in banking stocks. This pushed the Nigerian Stock Exchange’s composite All-Share Index to an intra-day high of 24,205.67 basis points, from its low of 24,130.28bps, before finishing above its opening figure at 24,130.28bps.

The session’s market technicals were weak and mixed as volume traded was slightly up from the previous session in the midst of breadth favouring the bears on negative sentiment as revealed by Investdata’s Daily Sentiment Report showing a ‘sell’ volume of 100%. Total daily transaction volume index stood at 1.00, just as the impetus behind the day’s performance stayed weak, with Money Flow Index reading 34.63 points, as against the previous 35.64ps, indicating that funds left  the market on continued selloffs.

Index and Market Caps

The NSEASI, at the end of Wednesday’s trading, gained 15.67 basis points, closing at 24,130.26bps, after opening at 24,114.59bps, representing a marginal 0.06% rise, just as market capitalization was up  N8.18bn, closing at N12.59tr, from an opening value of N12.58tr, representing 0.07% value gain.

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The upturn was due to price appreciations in stocks like Guaranty Trust Bank, Zenith Bank, Access Bank, Dangote Sugar, Sterling Bank, and Africa Prudential, which impacted mildly on the NSE’s benchmark index’s Year-To-Date reduce position which increased to 10.10%. Market capitalization YTD loss dropped to N359.12bn, representing a 2.81% drop from the year’s opening level.

Mixed Sector indices                                                                   

Performance indexes across the sectors were mixed as the NSE Banking and Industrial Goods index that closed 0.37% and 0.01% higher respectively, while the NSE Consumers Goods indexes led the decliners after losing 1.38%, followed by NSE Insurancewhich was down by 0.89%. Just as NSE Oil/Gas was flat.

Market breadth remained negative as decliners outnumbered advancers in the ratio of 13:11, while transactions in volume and value terms were up by 3.96% and 66.57% respectively, after investors exchanged 208.21 million shares worth N1.76bn, from the previous day’s 208.2m units valued at N1.06bn. Volume was driven by trades in Sterling Bank, UBA, Zenith Bank, FBNH and FCMB.

The day’s best performing stocks were Sunu Assurance and Cutix, after gaining 10% and 7.69% respectively and closing at N0.22 and N1.82 per share on low price attraction and market forces. On the flip side, Julius Berger and Nigerian Breweries lost 9.88% and 9.84%, closing at N15.50 and N30. 70 billion per share respectively on selloffs and profit taking.

Market Outlook

We expect the mixed intraday trend and bearish wave to continue as the earnings season kicks off any moment from now ahead of June inflation report, and the MPC meeting, while inconsistent government policies continue to dampen investor confidence ahead of the expectedly disappointing half-year corporate earnings reports. This is likely to support the wave of decline as pullbacks persist, creating new entering opportunities. Money flow index has continued to look down at 35.64, despite flowing from one sector to the other, seeking value in terms of low prices with high upside potentials.

This is just as economic recovery is threatened by the rising cases of the COVID-19 pandemic, ahead of the Q2 earnings reports season, which implies that opportunities are still available as sectoral rotation continues. Also, sectors that have suffered oversold, so far, offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment.

For immediate liquidity or cash we advice that you trade low priced stocks with serious caution to avoid being trapped. However, the market’s high dividend yield continues to attract buying interests, as few audited and unaudited corporate earnings will hit the market, going forward. This is despite the likely continuation of selloffs. Investors are buying to increase their positions in undervalued stocks ahead of Q2 numbers. It 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.

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. 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 and videos that will help you prepare and take advantage of the current happening in the market and economy are available at Investdata. How to invest or trade profitably in changing market dynamics and recession. Mastering earnings season for profitable investment To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085,08032055467, 08111811223 now.

Ambrose Omordion

CRO|Investdata Consulting Ltd
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