Market Update for April 15
The composite All-Share index of the Nigerian Stock Exchange (NSEASI) closed higher at the midweek as smart money increased their buying interests, breaking out the recent double tops formation at 21,879.95 basis points on demand for equities that had suffered losses with strong fundamentals. These classes of stocks are toasts of foreign investors, as well as dividend-paying stocks, just as the markdown and payment dates of many companies are within this month and May.
This trend may not last for too long, given that positive sentiments in stock markets are temporary because the Nigerian economy is already challenged and heading towards a recession, as projected by the World Bank and the International Monetary Fund.
The projected global slowdown economic recession across the globe follows the shutdown owing to the widespread of the Coronavirus (COVID-19) pandemic. Already, many states across Nigeria, in many states across the country, including Lagos the commercial capital, neighbouring Ogun, and Abuja, the Federal Capital have been on lockdown for the third week already.
The ongoing stock market rebound which stated last week entered its fifth consecutive session of uptrend and demand for high dividend yields stocks on Wednesday after they had tumbled since the late January 2020 rally. Despite the seeming bull transition, the worst is not over for many stocks as an expected economic downturn is already knocking, meaning any position taking now should be in stages.
Here is how the heavyweight battle is playing out and how smart investors can win, either way, it is all good until it is over, but retail investors should trade with caution at this point because a pullback is imminent. The return of smart money is because they were unable to exit the Investor & Exporters window of the exchange market.
Midweek’s trading started on the upside and was sustained throughout the session on strong buying interests among medium and high cap stocks, a situation that pushed the NSE index to intraday highs of 22,543.48 basis points, after breaking out the 22,000bps psychological line from its low of 21,873.47ps, before closing the day higher at 22,539.14bps on above-average traded volume.
Market technicals on Wednesday were positive and mixed as traded volume was lower than the previous session, in the midst of positive market breadth and high buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 99%. Total daily transaction volume index stood at 0.73, just as the impetus behind the day’s performance was relatively weak, despite Money Flow Index moving up to 44.67points, from the previous session’s 37.07ps, indicating that funds entered the market and some stocks.
Index and Market Caps
At the close of the session, the NSEASI gained a further 659.99bps, closing at 22,539.94 points after opening at 21,879.95s, representing a 3.02% up, just as market capitalization rose by N343.96bn to N11.75tr, from the N11.4tr it opened, also representing a 3.02% growth in investors worth.
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Wednesday’s advance was impacted by the demand for fundamentally sound stocks like Dangote Cement, Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, UBA, Access Bank, Dangote Sugar, and Oando. This impacted positively on the NSE index, reducing its Year-To-Date loss to 15.47%, while market capitalization YTD reduced to N1.26 trillion, representing an 8.32% drop from the year’s opening value.
Bullish Sector Indices
All the sectorial performance indexes closed higher, except for the NSE Insurance Index that closed 0.50% lower, while the NSE Banking index led the advancers after rallying 4.46%, followed by the NSE Industrial goods, Consumer goods and Oil/Gas that garnered 3.02%, 2.51% and 1.12% up respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 28:11, just as market activity in terms of volume and value were mixed. Volume was down by 41.47% to 326.49m shares, as against the previous day’s 557.82m units, while value rose by 27.48% to N3.34bn from the previous day’s N2.62bn. This volume was boosted by trades in FBNH, Zenith Bank, Guaranty Trust Bank UBA and FCMB.
The best-performing stocks for the session were Dangote Cement and Champion Breweries, which gained 10% each, closing at N133.10 and N0.80 per share on low price attractions and high dividend yields. On the flip side, Arbico and Wema Bank lost 9.82% and 9.68% closing at N2.57 and N0.56 per share respectively, on market forces and profit-taking.
We expect the trend to continue since there was a breakout of the double top on strong sentiment as market players and institutional investors load their portfolio ahead of more corporate earnings and macro-economic data from the National Bureau of Statistics. Also, more companies continue to notify the exchange and investors of their virtual annual general meetings and closed period for 2020 first-quarter earnings reports.
However, the high dividend yields continue to attract buying interests, while more audited corporate earnings hit the market going forward. This is despite the likely continuation of the selloffs, with investors buying to increase their positions in undervalued stocks ahead of dividend declaration. This is also against the backdrop of the fact that the capital wave in the financial market 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 in anticipation of the 2019 full-year earnings reports, amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend. We see investors focusing on the upcoming full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.
Again, the current undervalue state of the market offers investors 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 in the New Year.
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.
Meanwhile, the home study packs of our Invest 2020 Opportunities and Trade Ideas Summit, containing the 10 Golden Stocks for 2020 are available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.
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Tel: 08028164085, 08032055467