Investors Reposition Ahead Of 2019 Audited Earnings, Amidst Hope For Improved Liquidity

Market Update for February 4
Trading on the Nigerian Stock Exchange (NSE) extended its bearish sentiment on Tuesday for the seventh successive session, amidst a slowdown in the loss momentum as panic selloffs reduce with discerning investors cashing in on the pullbacks to accumulate a position in some stocks. This is especially true of banking stocks and others with impressive unaudited numbers capable of supporting dividend payouts when the final results are released.
This is particularly important, because the expected dividend announcement is around the corner, especially for early filers of audited financial reports, whose dividend yields are above the market average yields and Treasury Bills rates.
In the face of this current decline in the stock market, there are two spots to watch in the comings days and weeks that will signal reversal or continuation of this trend. These are the expected audited results with corporate actions, and the rate of returns in other investment windows. This will determine where the maturing the Central Bank of Nigeria (CBN) OMO investments will flow to as fund managers match the twin variables of returns and risk, just as money flow index is gradually looking up to indicate that funds are re-entering the market.
Tuesday’s trading opened on the downside before oscillating between the midday and afternoon on mixed sentiments, as selloffs continued in the face of repositioning that pushed the NSE index to an intraday low of 28,415.12 basis points, from its high of 28,540.30bps. It thereafter retraced up marginally, before closing lower at 28,432.27bps on a less than average traded volume.
Market technicals for the session were negative and weak, with volume traded slightly higher than the previous session’s, in the midst of negative market breadth and sentiments as revealed by Investdata Sentiment Report showing 86% ‘sell’ volume and 14% ‘buy’ position. The day’s total transaction volume index stood at 0.73, while the energy behind the day’s performance was weak, despite the slight increase in Money Flow Index, an indication that funds entered the market and some stocks despite the downmarket for the day.

Index and Market Caps
On Tuesday also, the composite NSE All-Share Index closed lower, after shedding 101.13bps, closing at 28,432.270bps from its 28.533.40bps opening, representing 0.35% drop, just as market capitalization lost N52.09bn, closing at N14.65tr, from an opening value of N14.7tr, representing a 0.35% value loss.
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The persisted downturn was impacted by selloffs in stocks like, Guaranty Trust Bank, Zenith Bank, Access Bank, FBN Holdings, UBA, Wema Bank, FCMB, CAP, Dangote Sugar, UACN and Honeywell Flour, among others, which impacted negatively on the NSE’s Year-To-Date gain, reducing it to 5.92%. Market capitalization, YTD, dropped to N1.69tr, representing a 13.02% growth over the year’s opening value.

Bearish Sector Indices
All the sectoral performance indexes were also red, though at a reduced rate, led by the NSE Banking which lost 1.09%, followed by Consumer Goods with 0.82%; Insurance, Oil/Gas and industrial goods with 0.65%, 0.16%, and 0.08% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 23:7, while market activities were mixed with volume traded inching up by 1.3% to 254.86m shares from the previous day’s 251.6m units. Transaction value declined by 27.8% to N3.04bn, from Monday’s N4.21bn. Volume was driven by transactions in Zenith Bank, FBNH, Access Bank, UBA and Guaranty Trust Bank.
The best-performing stocks for the session were Union Bank of Nigeria and Wapic Insurance with each gaining 10% to close at N6.60 and N0.33 per share, on market forces and sentiments. On the flip side, NEM Insurance and Royal Exchange Assurance were the biggest laggards, shedding 10% each, while closing at N2.16 and N0.27 on profit-taking and market forces.

Market Outlook
We expect a sustained pullback at a slower pace, despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying in the dip ahead of dividend news and declaration. This is also against the backdrop that capital wave in the financial market that may persist 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 may reverse the current trend.
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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