Investors Focus On Full-Year Earnings, Target Juicier Dividend Growth Potentials

Market Update for January 15
Stocks closed lower for the second day at the midweek on the Nigerian Stock Exchange as volatility and profit booking continued, despite the less-than-average traded volume traded during the session. This is yet another signal that market players are treading cautiously, besides an unwillingness to sell due to the seeming improved buying interest in the final minutes of the session.
Since liquidity remains one of the major fundamentals that drive prices in equity markets, the further crash of Treasury Bill rate across all maturities remains a plus for the market, especially with the lowest bid rate for 364-day at 4%; while the 91 and 182-day instruments stop rate was 2.95% and 3.95% respectively. The decline in rates resulted from oversubscription due to the excess liquidity in the financial market, after more OMO investments matured on Wednesday and the funds could not be rolled over due to restrictions placed by the Central Bank of Nigeria.
The bull-run on the equity market is expected to resume after this pullback or correction that is driven by short-term profit takers.
Also, the NSE’s securities lending operation is likely to further improve market liquidity, just as the new Finance Act recently signed into law will boost returns in the stock market, given that there is no longer Withholding Tax on dividends.
The improved economic activities witnessed in the last quarter of 2019 are likely to impact positively on full-year financials of companies which in turn may increase the payout of some listed companies, which will support the share prices going forward.
Meanwhile, volatility and the mixed trend continued at the midweek as the NSE’s Index opened the session on the downside and oscillated between midday and afternoon on renewed demand for some stocks. This was after the composite All-Share index touched intraday low of 28,855.22 basis points to breakdown the 29,000 mark from its high of 29,094.14bps, before finishing the session lower at 29,082.50bps.
Market technicals for the session were negative and weak, with volume traded lower than the previous session’s, as market breadth favoured the bears, amidst an improved ‘buy’ sentiments, as revealed by Investdata’s Sentiment Report of 87%, buy position and 13% sell volume.
The day’s total transaction volume index stood at 1.14, just as the energy behind the day’s performance remained strong, although looking down as Money Flow Index read 73.37points, from the previous 78.43ps. This is an indication that funds left some stocks and the general market.

Index and Market Caps
The benchmark NSEASI, at the end of the session’s trading, lost 220.65bps, closing at 29,082.50bps from the 29,283.15bps, representing a 0.75% decline. Also, market capitalization fell by N113.82bn, closing at N14.99tr from its opening value of N15.11tr, representing a 0.75% value loss.
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The day’s decline was driven by profit-taking in stocks like MTN Nigeria, BUA Cement, Dangote Sugar, Access Bank, Ecobank Transnational Incorporated, International Brewery, Oando, and Wema Bank, among others. This impacted negatively on the NSE’s Year-to-Date gain, reducing it to 8.27%. Market capitalization YTD slipped to N2.03tr, representing a 15.70% growth over the year’s opening value.

Bearish Sector Indices
All the sectoral performance indexes closed lower, except for the NSE Insurance Index that gained 0.33%, while NSE Industrial Goods led the decliners after losing 1.30%, followed by Banking and Consumer Goods which lost 0.21% each.
Market breadth was negative with decliners outpacing advancers in the ratio of 17:11, while market activities dropped in volume and value traded by 54.37% and 56.6% respectively to 380.08m worth N2.83bn shares, from the previous day 666.78m units valued at N6.52bn. The day’s volume was driven by trades in shares of Morison Industry, Access Bank, UBA, Zenith Bank and Transcorp Plc.
Beta Glass and Cornerstone were the best-performing stocks as they chalked 10% and 9.45% respectively to close at N64.90 and N0.58 per share, on market forces and sentiments. On the flip side, Livestock Feeds and Sovereign Trust Insurance lost 9.09% each, closing at N0.50 and N0.20 on profit-taking.

Market Outlook
We expect mixed performance and profit-taking to persist, just as position-taking on pullbacks as investors take advantage of price correction, ahead of the release of Nigeria’s December inflation data, as well as next week’s first Monetary Policy Committee meeting for the year 2020, and full-year earnings reports of companies. This is also against the backdrop of the prevailing low-interest rate regime in the money market.
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 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