Indecision Still On NGSE, Transaction Volume Drops, As Investors Await Audited Reports

Market Update for January 29
Nigeria’s equity market at the midweek extended its negative stance for the third consecutive session as investors tread with caution in the midst of selloffs in high cap stocks, amidst reactions to last week’s decision of the Monetary Policy Committee hiking Cash Reserves Requirements to 27.5%. This has expectedly triggered a circular flow of funds in the financial market as a result of portfolio rebalancing among institutional investors and fund managers.
The mixed earnings reports emanating from listed companies in their bid to meet the 30-day statutory deadline for filing the last quarterly numbers of 2019 are yet to impact the market. The reason may not be far-fetched, given that these reports are unaudited, just as there are not yet any proposals of dividend for investors, besides enabling discerning investors and traders to reposition their portfolios ahead of the audited the accounts that will come with corporate action in two weeks’ time.
Already, over 27 companies released their quarterly earnings reports, including both Q3 and Q4 results, on Wednesday, presented from Stanbic IBTC, NPF Microfinance, NASCON Allied, NEM, 11 Plc, BOC Gases, LASACO, and many others. Also, United Capital and Nigerian Breweries notified the NSE and investors of it closed period for the full year 2019 audited accounts.
Technically, the declining volume of trade signals the spate of indecision among traders, suggesting that the ongoing correction or pullback may not last for too long, as more Open Market Operations bills will mature in the coming weeks. Added to this is the fact that audited financial for 2019 is equally expected in the coming weeks as well, thereby presenting investors with the realities of these companies, vis-à-vis the 2019 full-year earnings predictions. In times like this, investors should reassess their expectations and re-position, or exit, where necessary.
Meanwhile, Wednesday’s trading opened on the downside and was sustained throughout the day on continued negative sentiment and selloffs that pushed the benchmark Index to an intraday low of 29,054.23 basis points from its high of 29,381.95bps. It thereafter retraced up slightly, before closing lower at 29,110.90bps on a low traded volume.
Midweek, market technicals were negative and weak, with volume traded lower than the previous session’s, in the midst of negative market breadth and sentiments as revealed by Investdata’s Sentiment Report showing 83% ‘sell’ volume and 17% ‘buy’ position. The day’s total transaction volume index stood at 0.70, while the momentum behind the day’s performance was weak as Money Flow Index read 43.91points, from the previous 53.75ps, an indication that funds left the market and some stocks.

Index and Market Caps
At the end of midweek trading, composite NSE All-Share index lost 267.73bps, closing at 29,110.90bps from an opening figure of 29,378.63bps which represented 0.91% decline, just as market capitalization depreciated by N137.91bn, closing at N14.99tr, from an opening value of N15.13tr, representing a 0.91% value loss in investors portfolios.
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The continued downturn was impacted by profit-taking and selloffs in Unilever Nigeria, MTNN, Guaranty Trust Bank, Ecobank Transnational Incorporated, Access Bank, FBN Holdings, UACN, AXA Mansard, NEM, Honeywell Flour, and Boc Gases, among others, which impacted negatively on the NSE’s Year-to-Date gain, reducing it to 8.45%. Market capitalization, YTD, drop to N2.04tr, representing a 15.72% growth over the year’s opening value.

Mixed Sector Indices
The sectoral performance indexes were bearish, except for the NSE Consumer Goods and Oil/Gas Indexes that closed marginally higher by 0.39% and 0.36% respectively, while the NSE Insurance index led the decliners, after losing 2.79%, followed by Banking and Industrial Goods with 1.26% and 0.18%, respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 18:10, while market activities in terms of volume and value dropped by 3.26% and 4.91% respectively to 242.76m shares worth N4.59bn from the previous day 250.93m units valued at N4.83bn. Volume was driven by transactions in Zenith Bank, Unilever, Guaranty Trust Bank, FCMB and UBA
Lasaco Assurance and Aiico were the best-performing stocks, gaining 7.69% and 6.33% respectively to close at N0.28 and N0.84 per share, on the market forces and earnings expectations. On the flip side, BOC Gases and NEM Insurance lost 9.09% and 8.33% respectively, closing at N4.50 and N2.20 on profit-taking and market forces.

Market Outlook
We expect the mixed trend to continue in the midst of profit-taking and positioning by investors taking advantage of the pullbacks, as the impact of last week’s CRR adjustment, slows down ahead of the full-year earnings reporting season. This is also against the backdrop that capital wave in the financial market may change in the midst of the 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 had pushed the market out of the bearish zone.
We see investors focusing on the upcoming of the 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 held in Lagos last December.
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 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.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467

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