Market Update for July 1
The first half of year 2020 on the Nigerian Stock Exchange (NSE) was mixed and volatile, closing on a negative note. The second half however began positively at the midweek, halting the previous day’s losing momentum on improved buying interests in manufacturing and bellwether stocks that lifted the benchmark All-Share index to close higher on less than average traded volume.
Wednesday’s trading closed on the uptrend to test the last support level turning resistance ahead of Q2 earnings season. A breakout of this level will usher the market back to the June sideways ranging trend.
The long speculated half-year numbers are expected to start hitting the market in two weeks, and 90% of these numbers will likely be disappointing and weak, reflecting effects of the partial lockdown of the nation’s economy in the second quarter.
In our opinion, how the market will react to these numbers as they finally hit the market depends on how investors are prepared with their trading strategies and interpretation of the earnings reports.
We will, therefore, advise cautious trading yet as averaging down is underway, while big moves towards healthcare stocks on Q3 when the impact of government intervention in the sector will start reflecting on their performance and numbers.
As we have always noted also, in any market situation there are opportunities, especially with the earnings season around the corner to change market momentum and action. You don’t have to be smart to make moneyin the stock market because the way it moves is always changing. As such, whatyou need is to think differently and educate yourself, using home study packsand videos, especially mastering the earnings season for profitable trading andinvesting in any market situation/cycle. That means we do not equate an “up” market with a “good” market and vice–versa. Markets present different opportunities to make money at differenttimes.
Meanwhile, midweek’s trading opened on the upside and was sustained throughout the session, despite moving up and down on selloffs and repositioning of portfolios ahead of Q2 numbers and the new quarter that pushed the NSE index to an intra-day high of 24,723.26 basis points, from its low of 24,479.16bps, before closing the day higher at 24,595.05bps on negative breadth.
Market technicals were mixed and weak as volume traded was lower than the previous session’s, with breadth favouring the bears and mixed sentiment as revealed by Investdata’s Daily Sentiment Report, showing a ‘sell’ position of 53% and buy volume of 47%. Total daily transaction volume index stood at 0.75, just as energy behind the day’s performance stayed weak, with Money Flow Index reading 23.63 points, up from the previous 16.09ps, indicating that funds entered market and some stocks
Index and Market Caps
The All Share index at the close of Wednesday’s trading gained 115.89 basis points, closing at 24,595.05bps from the previous day’s 24,479.22bps, representing a 0.47% growth, while market capitalization rose by N60.42bn, closing at N12.83tr from an opening value of N12.77tr which represented a 0.47% appreciation in value.
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Midweek’s upturn was due to buying interests in BUA Cement, Lafarge Africa, Access Bank, Cadbury, PZ, Oando and Japaul Oil, which impacted positively on the NSE’s benchmarkindex, reducing its Year-To-Date loss to 8.37%, as market capitalization YTD gain stood at N128.15bn, representing a 0.99% up from the year’s opening level.
Mixed Sector indices
The sectorial performance indexes were mixed as the NSE Industrial Goods and Oil/Gas indexes closed higher by 1.35% and 0.30% respectively, while the NSE Banking led the decliners after losing 0.88%. It was followed by Insurance and Consumer indexes which were down by 0.79% and 0.47% respectively.
Market breadth was negative as decliners outnumbered advancers in the ratio of 22:12, while transactions in volume and value terms dropped by 29.45% and 66.98% respectively to 198.01m shares worth N1.04bn, from Tuesday’s 280.67m units, valued at N3.14bn. Volume was boosted by trades in Wapic, UBA, Transcorp, Oando and FCMB.
Cadbury and Sterling Bank were the best performing for the day, after gaining 9.63% and 9.60%, and closing at N7.40 and N1.30 per share respectively on low price attraction and market forces. On the flip side, Neiemth Pharm and Learn Africa lost 9.75% and 7.69% respectively, closing at N1.49 and N1.08 per share respectively on profit taking.
Market Outlook
We expected a mixed trend as market react to declining Treasury Bills’ yield to 3.38%, Naira deprecating to an all-time high in the black market and government reversing pump price of fuel to N143.80 per litre, amidst the wobbling macroeconomic data and expectedly disappointing Q2 corporate earnings. This is likely to support the bearish wave and further pullbacks to create new entering opportunities as the Money Flow Index continues its up and down movement. This has revealed that smart money is exiting the market, despite flowing from one sector to the other, seeking value in terms of low prices with high upsidepotentials. This is just as economic recovery is expected to come fast on the back of the stimulus packages by government and the Central Bank of Nigeria (CBN), ahead of the Q2 earnings reports, which implies that opportunities are still available as sectoral rotation continues. Also,sectors that have suffered oversold, so far, offer attractive risk-rewardbuy-opportunities and outlook for considerable short, medium and long term investment.
For immediate liquidity or cash let us trade low priced stocks with serious caution to avoid being trapped. However, the market’s high dividend yield continues to attract buying interests, as few audited and unaudited corporate earnings will hit the market, going forward, despite the likely continuation of selloffs. Investors are buying to increase their positions in undervalued stocks ahead of Q2 numbers. This is also against the backdrop of the fact that the capital wave in the financial markets may persist in the midst of relatively low-interest rates in the money market, high inflation, and unstable economic outlook for 2020.
Again, the current undervalued state of the market offers 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 going forward. 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.
NB:The home study packs and videos that will help you prepare and take advantage of the current happening in the market and economy are available at Investdata. How to invest or trade profitably in changing market dynamics and recession. Mastering earnings season for profitable investment To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085,08032055467, 08111811223 now.
Ambrose Omordion
CRO|Investdata Consulting Ltd
amberose.o@investdataonline.com
Tel: 08028164085, 08032055467
