Investors Position Amidst Changing Sentiments In Hope Of More Liquidity, Improved Economy

Market Update for April 28
The benchmark All-Share index o the Nigerian Stock Exchange (NSE) started Tuesday’s trading green, as bargain hunting for financial services stocks continued in the midst of position-taking and profit booking that had characterized trading sustained the third straight sessions of positive outlook as large companies led gains.
This has been helped by the continued flow of funds into the market as revealed by Money Flow Index at 84.72 points, showing that foreign investors are still repositioning and realigning their portfolios, taking advantage of the many stocks trading below their intrinsic values.
The inflow of funds and positioning coincided with Monday night’s announcement by President Muhamadu Buhari to relax the lockdown in Lagos, the nation’s commercial capital, and the epicenter of the COVID-19 pandemic; Ogun, its neighbour; as well as the Federal Capital Territory, Abuja.
Also to be factored in is the fact that more earnings reports are being released to the market with mixed numbers that say a lot about the Nigerian economy not being in perfect shape even before the COVID-19 outbreak, as noted by the International Monetary Fund (IMF) in its statement on Tuesday (READ MORE). The Q1 numbers pouring in from NASCON Allied Industries, Julius Berger, International Brewery, while also revealing the state of these companies and their direction in Nigeria’s challenging economy, came below expectation. It was not all bad, as Ikeja Hotels was impressive, irrespective of the gloomy picture of the hospitality industry.
Okomu Oil announced a final dividend of N2.00, in addition to the N2.00 interim earlier paid, while the management of Julius Berger revised its corporate action downward, offering a N2.00, in addition to a bonus of one new share for every five held (READ MORE).
Meanwhile, it was a volatile and mixed session as buying interests remained visible in the financial services and Consumer Goods sectors pushed the NSE index to an intraday high of 22,761.23 basis points, from its low of 22,616.28ps. Thereafter, the index closed higher at 22,727.87ps on positive breadth.
Tuesday’s market technicals were positive and strong with higher traded volume than the previous session, in the midst of breadth that favoured the bulls on a high buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 77% and sell position of 23%. Total daily transaction volume index stood at 0.78, while the impetus behind the day’s performance stayed strong with Money Flow Index reading 84.72 points, up from the previous 75.82ps, indicating that funds entered some stock.

Index and Market Caps
At the close of Tuesday’s trading, the composite index gained 111.59 basis points, closing at 22,761.23ps from the opening level of 22,616.28bps, representing 0.49% rise, while market capitalization gained N58.15bn at N11.84 trillion from an opening value of N11.79tr which represented 0.42% value gain.
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The session’s advance was due to demand for medium and high cap stocks like Nestle, Guaranty Trust Bank, Zenith Bank, FBNH, Dangote Sugar, and UBA, which impacted positively on the NSE index, reducing its Year-To-Date loss to 15.33%. Market capitalization YTD stood at N1.23tr, representing a 7.93% drop from the year’s opening value.

Mixed Sector Indices
The performance across sectors was largely bullish, except for the NSE Industrial Goods and Oil/Gas that closed 0.22% and 0.17% lower respectively, while the NSE Banking index led the advancers after gaining 2.83%, followed by the NSE Insurance and consumer Goods that rose by 0.55% and 0.32% respectively.
Market breadth, turned positive as advancers outnumbered decliners in the ratio of 18:10, just as transactions in volume and value terms rose 146.61%% and 106.77% respectively, after investors exchanged 266.63m shares worth N2.75bn, from the previous session’s 108.12m units valued at N1.33bn. The day’s volume was boosted by trading in UBA, FBNH, Access Bank, Zenith Bank, and FCMB.
Cornerstone Insurance and Lasaco Assurance were the best-performing stocks, after gaining 9.3% and 7.3% respectively, closing at N0.59 and N0.28 per share on market forces. On the flip side, Wapic Insurance and Africa Prudential lost 7.4% and 5.9% respective, closing at N0.25 and N3.48 per share respectively, on profit-taking.

Market Outlook
We expect this trend of up and down movement to continue with profit and position-taking as players digest corporate earnings released so far and economic data, ahead of more corporate scorecards, even as MFI revealed smart money portfolios repositioning in the midst of crashing and oscillating oil prices.
However, the market’s high dividend yield continued 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, 08032055467