Analysts Await Confirmation Of Recovery Moves, As Sectoral Indices Remain Bearish

Market Update for December 11

The nation’s equity market had yet another mixed and volatile session at the midweek. But this time, it short-lived its seventh sessions of decline after equities inched up, closing higher with buying interests among investors, especially in high cap stocks, that pushed the All Share index higher, though, on a low traded volume and positive sentiment.

Going forward, funds inflow of over N1tr from OMO bills that matured recently, among other fixed-income instruments is expected to find its way into the equities or bond segments of the financial market. This will, expectedly, enable these investors to hedge against inflation at 11.61%, at a time fixed income market yields are declining due to rising prices, therefore, making the equity market attractive, given its average dividend yield of over 4.5%. The banking sector’s average yield is above 7.89%, while that of first-tier banks have dividend yields above October inflation figure.  Already, returns on pension assets or investments are already threatened, after going negative because they are in single digit.

As noted above, the market is posting its first gain after seven consecutive sessions of losses, the price appreciation recorded by MTNN, UBA and Access Bank were the major boosters of the composite index. In other words, observing performance during Thursday’s trading session will confirm if the bears intend to take a brief rest or not.

Meanwhile, we advise that investors should have, at least, one high cap stock in their portfolios to achieve a balance for a defensive portfolio, or fill such portfolios with a few equities that are currently trading against the market but have strong fundamentals.

Wednesday’s trading started on a mixed note of up and down movement in the morning before retracing up between midday to the afternoon on a renewed demand for bellwether stocks, thereby pushing the benchmark index to an intraday high of 26,445.80 basis points, from its low of 26,332.35bps. Thereafter, it pulled back slightly to close at 26,434bps on a negative breadth.

Midweek’s market technicals were negative and mixed with a lower volume than at the previous session, amidst the negative breadth and high buying pressure as revealed by Investdata’s sentiment report of a 90% ‘buy’ volume and 10% sell position. The day’s total transaction volume index stood at 0.60, as momentum behind the day performance was weak but inched up as Money Flow Index reads 46.13 points, up from the previous 45.16bps. This indicates that funds entered some stocks and the general market.

Index and Market Caps

At the end of midweek trading, the benchmark index, gained a marginal 49.79bps, closing at 26,434bps from the 26,384.21bps it opened, representing 0.19% growth, just as market capitalization increased by N24.03bn to close at N12.76tr, from an opening value of N12.73tr, which also represented a 0.19% value gain.

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The session’s upturn was impacted by buying interest in stocks like, MTNN, Dangote Sugar, Access Bank, UBA, UACN, Oando, Caverton and Transcorp, which impacted mildly on the NSE’s Year-to-Date loss, as it dropped to 15.90%. Market capitalization YTD gain inched up slightly to N1.04tr, representing an 8.85% growth from the year’s opening value of N11.72tr.

Mixed Sector Indices

The sectoral performance indexes were largely bearish, except for the NSE Oil/Gas and Consumer Goods that closed higher by 0.46% and 0.12% respectively, while the NSE Insurance led the decliners, after shedding 0.67%, followed by the Banking Index’s 0.12%; while NSE Industrial Goods closed flat.

Market breadth for the day was negative as decliners outnumbered advancers in the ratio of 14:12, while market activities were down in volume and value traded by 8.18% and 14.83% respectively to 180.23m shares worth N3.03bn from the previous day’s 196.29m units valued at N3.55bn. This volume was driven by UBA, Zenith Bank, Guinness Nigeria, Guaranty Trust Bank and Access Bank.

The best-performing stocks for the day were C & I leasing and Courtville Business Solution which chalked 9.26% and 4.35% respectively to close at N5.90 and N0.25 respectively, on the back of market forces. On the flip side, Challaram, and Union Diagnostics lost 9.74% and 8.33% respectively, closing at N2.78 and N0.22 on selloffs and profit-taking.

Market Outlook

We expect the mixed performance to slowdown as investors take advantage of the pullback and low supply to position, ahead of the usual Santa Claus and year-end rally as capital flow and repositioning in value stocks continue. There is also the changing sentiment in the expectation of improved liquidity and positive economic indices

Again, the current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term horizons. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down to usher in 2020, just as was noted in the 10 golden stocks and trading ideas for 2020 discussed last weekend during the Investdata  2020 Traders & Investors Summit.

Also, traders and investors need to change their strategies owing to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.

Meanwhile, we appreciate all that made Invest 2020 Traders and Investors Summit a success. The home study pack will be available next week. To book for the pack, Send Yes or Stock to 08028164085, 08032055467, 08111811223 now.

Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467