Market Update for February 20
The nation’s stock market, on Thursday, resisted further decline as its composite All-Share index closed marginally higher, halting five consecutive sessions of losses on a higher traded volume that signals an improving buying interest and in hope of the major earnings reports. During the session also, selling pressure and profit-taking subsided as the market enters into the 2019 financial year dividend declaration season.
Despite, the mixed sentiments and losses suffered by the NSEASI since the last Monetary Policy Committee meeting of the Central Bank of Nigeria owing to the upward adjustment in the Cash Reserve Requirement to 27.50% from 22.50%. This deflated the rally recorded at the beginning of the year as funds flowed from equity assets, even as the release of Q4 unaudited numbers which were mixed, in the midst of different regulations removed the speculative tendencies that this period of the year is known for.
The changing wave and thinking in the nation’s financial market also calls for a change in investing strategies and portfolio rebalancing, at a time many investible funds are lying idle at a time of rising inflation. It is long established that under this circumstance, investors can only hedge by investing in dividend-paying stocks, especially now that earnings season has commenced.
Market recovery will continue when the 2019 full-year audited results release season fully takes off.
Before now, we noted that, despite the correction, a good number of listed equities did not follow the NSEASI movement pattern and trend as accumulation continues in stocks with high dividend expectations.
We, therefore, advise investors to take advantage of low-priced equities as an intelligent investment strategy. It is important to note that such equities should be selected after establishing the possibility of receiving cash dividends when the expected full-year audited result is finally made available to the market.
Meanwhile, Thursday’s trading opened on the upside in the morning and pulled back by the mid-morning to the early afternoon before oscillating in the late afternoon on increasing buying interests in Industrial Goods and financial services providers as NSE index touched intraday high of 27,622.42 basis points, from its low of 27,292.61bps. Thereafter, the index rebounded marginally, and closed the day higher at 27,568.91bps on a high traded volume.
Market technicals for the session were positive and strong, as volume traded was higher than the previous session, with breadth favouring the bull, amidst a high buying pressure as revealed by Investdata’s Sentiment Report showing 84% ‘buy’ volume and 16% ‘sell’ position. The total transaction volume index stood at 1.69, but momentum behind the day’s performance was seriously weak, with Money Flow Index sliding down to 4.39 points, from the previous day’s 4.55 points. This indicated that the market is still lacking in liquidity, despite the upmarket.
Index and Market Caps
The composite index, at the end of Thursday’s trading, gained 45.83bps, closing at 27,568.91bps from its 27.523.08bps opening, which represented a 0.17% rise just as market capitalization climbed by N23.87bn, closing at N14.36tr, from the N14.34tr opening level, which also represented a 0.17% value gain.
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Thursday’s upturn was impacted by buying interest in BUA Cement, UBA, UBN, United Capital, Africa Prudential, FCMB, Fidelity Bank and Wapic Insurance, among others, which impacted mildly on the NSE’s Year-To-Date gain. This increased to 2.71%, while market capitalization YTD gain inched up to N1.4tr representing 10.83% growth over the year’s opening value.
Mixed Sector Indices
The sectorial performance indexes were largely bearish, except for the NSE Industrial Goods and Insurance that closed higher by 1.65% and 1.30% respective, while the NSE Oil/Gas index led the decliners with its 0.86% loss, followed by NSE Banking and consumer goods which fell by 0.51% and 0.04% respectively.
Market breadth turned positive as advancers outnumbered decliners in the ratio of 19:10, while market transactions in terms of volume and value traded were mixed as volume rose 67.2% up to 484.99m shares from the previous day’s 290.16m units, whereas value was down by 28.6% to N3.59bn, from midweek’s N5.03bn. This volume was driven by trades in Sovereign Trust Insurance, Guaranty Trust Bank, Zenith Bank, UBA and FBNH.
Aiico Insurance and Ikeja Hotel were the best-performing stocks for the session as they topped the table after gaining 10% each, closing at N0.99 and N1.21 per share respectively on dividend expectations and market forces. On the flip side, Law Union and Champion Breweries lost 10% and 9.28% respectively at N0.81 and N0.88 on profit-taking and selloffs.
We expect dividend news-driven reversal in the market, as the index continues to bounce around 61.8% Fibonacci retracement on a higher traded volume, with more audited earnings expected to hit the market any moment from now. This is despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying increasing positions in high dividend-paying 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 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.
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 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