Investors Position In Defensive, Healthcare Stocks On NGSE, Amidst Impending Economic Downturn

Market Update for the Week Ended April 17 and Outlook for Apr 20-25
Last week’s trading on the Nigerian Stock Exchange (NSE) defied the gloomy economic situation as impulsive demand for stocks continued to rise on positive sentiments that lifted equity prices against prevailing realities.
This second consecutive week of uptrend has reduced the year-to-date loss suffered by the benchmark All-Share index to 14.61%, while the Month-to-date return stood at 7.61%, following which the index’s pattern shows a “V-bottom.” The market seems to be ignoring projections that the Nigerian economy is already challenged and sliding into recession.
Technically, the composite NSEASI and stocks are ready to jump higher as smart money takes what may be temporary positions while anticipating a reopening of the economy that has been shut down for five weeks to check the spread of the Coronavirus (COVID-19) pandemic.
This speculation-powered rally may not last, given the daily incremental growth in the number of new cases and deaths. The rising incidences of insecurity in the midst of the lockdown are another source of concern to many investors and Nigerians.
The sustained uptrend in the period under review was driven by increased buying interests on blue-chip stocks with high dividend yields that had tumbled from the late January 2020 rally to the early April coronavirus lows are already bouncing back on the bull rally mode that had followed through in recovering from the virus.
Despite this seeming bull transition, the worst is not over for many listed companies. As expected, the economic downturn is already here, meaning that any position taken now should be in stages.
The market has given Investdata ‘Buy and Sell’ signal members, and discerning investors, another amazing opportunity to buy stocks at huge discounts to book value. As you start investing like the smartest wealth builders of our time, these are the moments when real wealth can be created in stocks. We desire that you react to the emerging market information, not watching from the sidelines.
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Movement Of NSEASI
It was a bullish week of four trading sessions marked by strong buying interests in all the sectors, irrespective of the remote trading and extended lockdown. Trading for the week opened on a positive note, after the Easter holidays with the NSE All-Share index gaining 2.32% on Tuesday, a trend that was sustained during the following days when the composite index gained by 3.025%, 0.07%, and 1.63% respectively on Wednesday, Thursday and Friday. These brought the week’s total gains to 7.19%, which was more than triple the previous week’s 1.37% growth.
Consequently, the NSEASI gained 1,537.56 basis points, after opening at 21,384.03bps, touching an intra-week high of 22,927.88bps and low of 21,239.02bps on a high buying pressure and low traded volume with many investors opting to continue seating on the fence, amidst the uncertainties surrounding the economic outlook. The index closed the week at 22,921.59ps, after breaking out the 22,000 psychological lines to test 22,927.88 points, just as market capitalization soared by N801bn. It, therefore, closed at N11.95 trillion, from the N11.14tr it opened at, representing a 7.19% up. This was despite the share price adjustment of Access Bank and FCMB Holding for dividends of 40kobo and 14 kobo respectively proposed by their directors during the week,
During the week, Africa Prudential and Unilever released their Q1 2020 unaudited results showing declines in earnings and profit, which translated into Earnings Per Share of 17 kobo and 19 kobo respectively. Also, more than 10 companies notified the exchange of their closed period and board meeting to approve Q1 earnings reports, while more 2019 audited financials are expected in the coming days.
There were buying interests in healthcare stocks as Ekocorp, Union Diagnostic and Morison Industry hitting their 52 weeks high, while May & Baker was among the top gainers for the week. This reflected in the market breadth as advancer’s outnumbered decliners in the ratio of 37:21, but the impetus behind the week’s performance was weak, with Money Flow Index fell to 20.87bps from 31.43bps recorded in the previous week. The bull sentiment during the period was confirmed by Investdata’s Sentiment Report for the week, showing 100% ‘buy’ volume, just as the transaction volume index stood at 0.97.

Bullish Sectoral Indices
All the sectoral performance indexes were bullish for the week, and NSE Consumer Goods led the advancers, gaining 15.57%; followed by the NSE Industrial Goods index with 5.16% up; while the NSE Banking, Oil/Gas and Insurance climbed up by 4.73%, 1.47%, and 0.85% respectively.
Market data in terms of volume and value were low, dropping by 38.74% and 35.31% respectively as investors exchanged 1.49bn shares worth N12.89bn, compared to the previous week’s 2.44bn units valued at N19.93bn, even as many traders switch onto the wait-and-see mode despite the bull-run.
Meanwhile, discerning investors continue to take advantage of the low prices in the midst of the lockdown, confusion, and insecurity to reposition their portfolios for the medium to long- term, as the earnings reporting season for Q1 kicked off. The week’s volume was boosted by trades in financial services stocks, especially Omoluabi Mortgage Bank, FBNH and Zenith Bank.
Nigerian breweries and Conoil were the best-performing stocks for the week, after topping the advancers chart by gaining 45.73% and 32.32% respectively, at N32.35 and N17.40 per share on low price attractions and the 2019 full-year dividend expectations. On the flip side, Nahco and Aradova (formerly Forte Oil) lost 11.25% and 10.24% respectively, closing at N2.13 and N10.10 per share on profit-taking and selloffs.

Market Outlook
We expect a mixed performance in the new week due to profit-taking from the recent rally, price adjustments of MTNN, Fidelity Bank and Capital Hotel for dividends declared, as well as the impact of inflows of more 2019 full-year and 2020Q1 results. Investors will also be on the lookout for the developments regarding the implementation of measures to contain the novel Coronavirus (COVID-19) pandemic and its effects on the economy which is already projected to close the year in recession with a negative GDP of 3.4%.
Already, we notice that investors are taking the position in healthcare and other defensive stocks that are likely to survive this meltdown, following which there is increased transactions in them, even as global markets are on the recovery path already, as lockdowns are gradually being relaxed.
Also, do not forget to identify and play defensive stocks among the many fundamentally sound companies that remained depressed, making them attractive for bargain hunting by market players. This has also resulted in significant improvements in Dividend Yields of stocks, even as we note the fact that fund managers who held cash before now, may have to rethink the strategy and go for value stocks with high upside potentials.
This is just as more liquidity flow to high Dividend Yield stocks with sound fundamentals, a situation that will also be based on the seemingly positive outlook for the domestic economy, despite the mixed outlook for 2020 from various analysts.
While discerning investors should take advantage of the current low stocks valuation to position for the medium to long-term, it is noteworthy that the Nigerian equity market is selling at a discount and therefore offers high upside potential.
On a bargain-hunting motive supporting positive performance, especially with many fundamentally sound stocks remaining underpriced. With a dividend yield of major blue-chips continuing to look attractive in recent weeks, we expect speculative trading to shape the market’s direction, despite the seeming mixed outlook.
To position for the short to long-term, this is why investors should target fundamentally sound, dividend-paying stocks, for possible capital appreciation in the coming months. This was noted in the 10 golden stocks and trading ideas for 2020, as discussed extensively during the Investdata 2020 Opportunities & Trade Ideas Summit.
Meanwhile, the home study packs of Invest 2020 Opportunities and Trade Ideas Summit containing the 10 Golden Stocks for 2020 are available with an average return of 13.37% in less than 30 days. 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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