Market Update for March 10
Midweek’s trading activities on the Nigerian Stock Exchange closed positive, on less than average traded volume, halting the previous session bear market as bulls resurfaced on buying interest in high-priced stocks that pushed the composite index up. This coincided with the announcement by the NSE management of the final approval for its demutualization project from the Securities and Exchange Commission and the Corporate Affairs Commission (READ MORE).
Investdata agrees that this will expectedly boost market liquidity and the operating capital of stockbroking firms in the country.
The prevailing high dividend yields follows the sustained price corrections and pullbacks in the midst earnings season, with expectation of more numbers from some other companies. These had attracted bargain hunters taking advantage of the relatively low prices in the recent past. We must, however, warn that while the market correction is not over yet, the oscillating trend signals that a rebound is underway, especially when it gets to the level where fixed income market players and others jumped into the equity space.
Also on Wednesday, the panic selloff in UBA and other banking stocks slowed down after its resisted further decline to form a strong support level at N6.85 per share, after the market had reacted to a dividend cut, despite posting impressive performance as revealed by its numbers. Nonetheless, investors are still cautious of banking stocks despite the improved full-year performances as revealed in the numbers presented by Zenith Bank and UBA, despite the negative impact of the ravaging effects of the ravaging effects of the coronavirus pandemic outbreak on the economy in 2020.
The midweek pause after the NSE index had broken down its 39,000 basis points support level, is a sign of volatility towards the next one, sported around 38,464.00bps. Should the index break this point, the next visible support is far down 34,396.3 points.
Note, therefore, that technically, the ongoing negative move is best described as a market correction, even as the consistent downtrend could be linked to the sharp rally recorded in 2020, ahead of the full year earnings season and Q1 numbers, coupled with favorable and positive economic indices. Market rebound can coexist with the uptrend in fixed income yields, following which we advise investors to play dividend stocks for reduced investment risk around the market.
Meanwhile, Wednesday’strading started slightly on the upside and oscillated on demand for bellwether stocks and selloffs in medium and low priced equities. This situation pushed the NSE’s index to an intraday high of 38,966.38 basis points from its lows of 38,677.30bps, before closing above its opening point at 38,931.25bps on a flat market breadth.
Market technicals were positive and mixed, with volume traded lower than previous day’s in the midst of flat breadth on a high buying sentiment as revealed by Investdata’s Sentiments Report showing 88% ‘buy’ volume and 12% ‘sell’ position. Total transaction volume index stood at 0.83 points, just as energy behind the day’s performance remained weak, with Money Flow Index looking up slightly at 24.11pts, from the previous day’s 23.80pts, indicating that some funds entered the market.
Index and Market Caps
At the close of midweek’s trading, the benchmark NSE All-Share index gained 244.40bps to close at 38,931.25bps after opening at 38,686.85bps, representing a 0.63% rise. Similarly, market capitalization rose by N127.87bn, closing at N20.37tr, from previous day’s N20.24tr, which also represented 0.63% gain.
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The day’s upturn was driven by the demand for Dangote Cement, Nestle, Seplat, NB, Guinness, and Access Bank, among others. This impacted positively on Year-To-Date loss which reduced to 3.33%, just as market capitalization loss dropped to N687.74bn, or 3.24% below its opening value.
Mixed Sector Indices
Performance indexes across sectors were mixed, as the NSE Industrial goods, Consumer goods and Insurance closed higherby 1.74%, 0.40% and 0.18% respectively, while NSE Banking index led the decliners, after shedding 0.35%, followed by Oil/Gas 0.03% respectively lower.
Market breadth was flat, as decliners were equal to advancers in the ratio of 25:25; just as activity in volume and value terms decline, while investors exchanged 368.22m shares worth N4.91bn. Volume was driven by trades in UBA, FBNH, Guaranty Trust Bank, Sovereign Trust Insurance and Japaul Gold.
Morison Industry and Champion Breweries were the best performing stocks, after gaining 9.72% and 8.91% respectively, closing at N0.79 and N2.20 per share respectively on market forces. On the flip side, Consolidated Hallmark Insurance and Eterna lost 10% and 9.94% respectively, closing at N0.27 and N4.62 per share, on selloffs.
Market Outlook
We expect the mixed trend to continue as more corporate earnings hit the market in the face of rising fixed income market yields, oil prices and high dividend yields during this earnings season. Also, the pullbacks offer bargain hunters and income investors another opportunity to reposition, while more companies release their full-year numbers to support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected 2020 full earnings reports, until the next MPC meeting in March.
The NSE’s index action and indicators are in divergence on a low traded volume and positive buying sentiments.
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