Market Update for January 9
The Nigerian stock market, on Thursday, had yet another mixed, but the volatile trading session, extending its upward swing for the ninth consecutive trading session on increased demand for high cap stocks that made the benchmark index to soar higher. This was despite the short-term profit-booking by speculators during the session.
The session rallied, breaking out another psychological line of 29,000 basis points as it tested 29,484.10bps on price appreciation by highly capitalized stocks, as well as the day’s listing of 33.86bn ordinary shares of BUA Cement Plc at N35 each. This marked the completion of the merger between CCNN Plc, which resulted in the delisting of its entire 13.14bn ordinary shares from the bourse, and OBU Cement.
In the first six trading sessions of the year, the benchmark All-Share index of the NSE has gained 9.51%, which is already a pointer that the market recovery expected in the year 2020 has started. This is especially as the Central Bank of Nigeria (CBN) retains the 65% Loan-Deposit Ratio, while lending rates drop further in a low-interest rate regime, which is expected to support the general economy and stock market.
We note that in the history of Nigeria, this is the first time money market rates are going this low, as the monetary authorities try to stimulate productivity that will drive growth while employing proactive initiatives with a focus on its price stability mandate.
Remember, we have talked about the period that followed the 2002 flip-flop by the CBN, where money market rates were forced to reverse course on monetary policy after aggressively tightening into low inflation. There was also a tepidly recovering economy that impacts positively on the corporate earnings and stock market until 2007 when the money market rate began climbing until it peaked in 2008 at 64,000bps.
When rates are low, stocks go crazy and within four quarters the economy grew above 4% and the stock market was bullish in 2000, 2001, 2003, and from 2004 to 2007, before the global meltdown of 2008.
Thursday’s trading opened on the upside and was sustained throughout the session, despite oscillating on profit-taking and buying interest in high cap stocks that pushed the composite index to an intraday high of 29,484.10bps, from its low of 28,539.16bps. Thereafter, the session closed higher than it opened, at 29,395.57 points on flat market breadth.
Market technicals for the day were positive and mixed, with lower volume traded than the previous session in the midst of flat market breadth and strong buying pressure as revealed by Investdata’s Sentiment Report of 91%; volume and 9% sell position.
The day’s total transaction volume index stood at 2.37, just as the momentum behind the day’s performance was strong, with Money Flow Index reading 73.34points, from the previous 71.10bps. This is an indication that funds entered some stocks and the market at large, despite the profit-booking.
Index and Market Caps
At the end of Thursday’s trading All-Share index gained 833.09bps, closing at 29,395.57bps from the 28,562.48bps, representing 2.92% growth, just as market capitalization rose by N1.38tr on the listing of BUA Cement (READ MORE) to close at N15.16tr from its opening value of N13.87tr, representing a 9.99% appreciation in value.
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The day’s upturn was driven by demand for high cap stocks like Dangote Cement, MTN Nigeria, Guaranty Trust Bank, Zenith Bank, Presco, and UACN, among others, all of which impacted positively on the NSE’s Year-to-Date gain, rising to 9.51%. Market capitalization YTD climbed to N2.21tr, representing a 17.02% growth over the year’s opening value.
Bearish Sector Indices
All sectoral performance indices were down, except for the NSE Industrial Goods index that was up by 7.98%, while the NSE Banking index led the decliners, after losing 0.39%; followed by Consumer Goods and Oil/Gas Index that was down by 0.21% and 0.17% respectively. Just as the NSE Insurance index was flat.
Market breadth remained positive as advancers marginally outnumbered decliners in the ratio of 22:21, while market activities were down, with volume declining by 6.56% as investors exchanged 693.19m shares worth N7.44bn from previous day’s 741.82m units valued at N9.22bn. The day’s volume was driven by Wapic Insurance, Transcorp, Zenith Bank, FBNH and UBA.
Sovereign Trust Insurance and Champion Brewery were the best-performing stocks, after gaining 10% each to close at N0.22 and N0.99 respectively, on market sentiments and forces. On the flip side, Unity Bank and Union Dicon Salt lost 10% and 9.88% respectively, closing at N0.72 and N10.95 on profit takings and selloffs.
We expect a mixed performance on profit-booking and position-taking as investors take advantage of low prices, ahead of economic data and portfolio managers repositioning for the New Year. This is against the backdrop of the 364-day Treasury Bills rate dropping to 5.2% while saving the bond rate stood at 7.14%.
Also, investors and traders are positioning in anticipation of the 2019 full-year earnings reports, amidst changing sentiments in the hope of improved liquidity and positive economic indices which had pushed the market out of the bearish zone.
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 undervalued 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.
Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.
Meanwhile, the Investdata team welcomes you to a bullish 2020. The home study packs of 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.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467