Expect Mixed Trend As Investors Digest Corporate Earnings, Await Q1 GDP Data

Market Update for May 4
Nigeria’s equity market Monday continued its uptrend on the first trading session in May with the key performance index closing in the green and extending its six consecutive sessions of positive sentiments, after the holiday to celebrate workers’ day. It was also the beginning of the season of lockdown easing by the Federal Government in Lagos, FCT, and Ogun State to check the spread of coronavirus pandemic across the nation. So, the virus has spread to 34 states of Nigeria with a significant rise in the number of new cases to 2,802 people, over 90 deaths, and 417 treated and discharged from the isolation centres.
The sustained bullish stance in the midst of high volatility and profit-taking is attributed to increased buying interests in medium and high cap stocks like MTNN and Zenith Bank, even as investors react positively to companies that had posted impressive numbers recently while positioning in those that are yet to release their 2019 full year and 2020Q1 earnings reports.
It’s true that the market has maintained positive technicals as Nigerian Stock Exchange (NSE) All-Share Index (NSEASI) trading above its 20-Day-Moving-Average, after forming a cup and handle chart pattern that supports an uptrend and is heading to cross the 50-DMA. This is the blue line on the chart below in a new month, as funds continue to enter the market, knowing that many companies have their dividend qualification date in May, even as players should be cautious and have good exit strategies at all times.
At the close of Monday’s trading, we noticed a flat position in the Money Flow Index on a daily time frame reading 88.52points at the time the weekly chart signaled an uptick to read 16.49 points after being on the downtrend since January 24, 2020. This is a mixed signal that traders and investors should watch; knowing that profit booking has hit the banking stocks following which it led the market performance in April. As we filter market noise and study the behavioral pattern, investors should know that bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria- according to Sir John Templeton.
Monday’s trading opened slightly upside, but turned red in the mid-morning, so it oscillated throughout the day to close in the green, pushing the NSE’s composite index to an intraday high of 23,121.74 basis points, from its low of 22,940.26ps. Thereafter, it closed higher at 23,089.86ps on a negative breadth.
The session’s market technicals were positive and mixed with traded volume lower than the previous session, in the midst of breadth that favored the bears and positive sentiment as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 82% and sell position of 18%. Total daily transaction volume index stood at 0.81, just as the energy behind the day’s performance stayed strong with Money Flow Index reading 88.52 points, slightly down from the previous 88.64ps, indicating profit-taking in the midst of funds entering some stocks and the market.

Index and Market Caps
At the end of Monday’s trading, the NSEASI gained a marginal 68.85bps, closing at 23,089.86ps, from the opening level of 23,021.12bps, representing a 0.30% up, while market capitalization rose by N35.88bn to close at N12.03tr, from an opening value of N11.997tr, representing a 0.30% value gain in investors’ portfolios. This was despite the adjustment in the share price of Sterling Bank and Lafarge Africa for dividends of three kobo and N1.00 respectively.
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Monday’s upturn was driven by position taking in MTNN, Zenith Bank, Ardova, UACN, Dangote Sugar, Oando, and Vitafoam. This impacted positively on the benchmark index, reducing its Year-To-Date loss to 13.98%, while market capitalization YTD stood at N968.21bn, representing a 6.01% drop from the year’s opening level.

Mixed Sector Indices
The sectorial performance indexes were largely bearish, except for the NSE Oil/Gas and Consumer Goods that closed 0.85% and 0.15% up respectively, while the NSE Insurance index led the decliners after losing 1.95%, followed by the NSE Industrial Goods and Banking indexes which closed 1.31%, and 1.21% lower respectively.
Market breadth, turned negative as decliners outnumbered advancers in the ratio of 19:15, while market transactions in terms of volume and value were down by 30.49% and 26.46% respectively, with investors trading 249.86m shares worth N2.4bn, as against the previous day’s 359.47m units valued at N3.26bn. The day’s volume was boosted by trades in Guaranty Trust Bank, FBNH, UBA, Zenith Bank and Access Bank.
Prestige Assurance and Ardova were the best-performing stocks, gaining 10% and 9.96% respectively, and closing at N0.55 and N12.70 per share on market forces. On the flip side, Neimeth Pharm and NEM Insurance lost 10% each, closing at N0.54 and N1.98 per share respectively, on profit-taking.

Market Outlook
We expect mixed trend on profit and position-taking as players digest corporate earnings released so far, even as the NSE index has formed another double top at 23,143.13bps, ahead of more corporate scorecards and Q1 GDP, even as MFI revealed smart money participation slowing down as lockdown is gradually being eased in the face of rising virus spread and oscillating oil prices after the crash.
However, the market’s high dividend yield continues to attract buying interests, while more audited corporate earnings hit the market going forward, despite the likely continuation of selloffs, with investors buying to increase their positions in undervalued stocks ahead of dividend declaration and Q1 numbers. 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 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 different Stocks for various investment objectives in 2020 and beyond are available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.

Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 0803205546

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