Low Confidence Drags NGSE Index Further Down, As Dividend News May Bring Respite

Market Update for February 24
Indices on the Nigerian Stock Exchange (NSE) again took a deep drive on Monday to start the week on the back of serious negative sentiments, which wiped all that the composite index gained in January which ranked it among bourses with the best returns on investment for that month.
The pullback occurred on a day Mrs. Zainab Shamsuna Ahmed, Nigeria’s Minister of Finance, Budget and National Planning visited the exchange to rub minds with capital market stakeholders, as investors continue to ponder on the impact of the Central Bank of Nigeria’s unconventional monetary policy initiatives. This is made worse by such global uncertainties as to the spread of the Coronavirus which is threatening economic outlook, oil price, insecurity and a lack of clear economic policy from the Nigerian government.
Monday’s decline also coincided with the release of the country’s better-than-expected Gross Domestic Product, showing that the economy grew by 2.55% year-on-year, the highest since the days of the last economic recession in 2016 (READ MORE). This was despite the unfavourable global economic conditions that hit both developed and emerging economies, with the economy expanding by 2.27% for the entire 2019, beating the 2.1% projection for the period by the International Monetary Fund (IMF). It was also healthier than the 1.91% growth rate recorded in 2018.
The NSE index was weighed down significantly for the second consecutive session on Monday by the negative sentiment that hit banking stocks, as Money flowed into bonds and Treasury Bills, as investors ignored the prevailing low yield in those windows. However, with more clarification expected from the CBN, discerning investors should take advantage of this pullback, especially in dividend-paying stocks that have lost value, due to the general bear market.
Monday’s trading opened on the upside in the early hours, before pulling back between midmorning to the early afternoon and oscillating in the late afternoon on market forces as the NSE’s composite All-Share index touched intraday low of 27,000.85 basis points, from its high of 27,515.75bps. Thereafter, it inched up slightly but closed the session lower than the previous session at 27,041.03bps on a very high traded volume.
Monday’s market technicals were negative and mixed, with volume traded higher than the previous session, on a negative breadth and high selling pressure as revealed by Investdata’s Sentiment Report showing 92% ‘sell’ volume and 8% ‘buy’ position. The total transaction volume index stood at 1.45, but the momentum behind the day’s performance was absolutely weak, at a time Money Flow Index stayed flat at 4.02points, same as the previous day. This indicated that the market is lacking liquidity, amidst the persistent selloffs.

Index and Market Caps
At the end of Monday’s trading, the composite index shed 347.59bps, closing at 27,041.03bps from its 27.388.62bps opening, which represented a 1.27% decline, just as market capitalization lost N181.08bn, closing at N14.09tr, from the N14.27tr opening level, which also represented a 1.27% depreciation in investors’ portfolio.
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Monday’s decline was impacted by selloffs in banking stocks and others like Nigerian Breweries, Cadbury and Honeywell, further dragging down the NSE’s Year-To-Date gain to just 0.74%, while market capitalization YTD gain fell to N1.13tr, representing 8.71% growth over the year’s opening value.

Bearish Sector Indices
All the sectorial performance indexes were in red to start the week, as NSE Bankingindex led the decliners after losing 4.74%, followed by NSE Industrial goods with 0.85%, while Consumer Goods, Insurance and Oil/Gas fell by 0.72%, 0.47%, and 0.45% respectively.
Market breadth was negative, with decliners outnumbering advancers in the ratio of 33:5, while market activities in terms of volume and value traded rose by 1.83% and 31.53% respectively to 429m shares worth N7.3bn, from the previous day’s 421.28m units valued at N5.55bn. This volume was driven by trades in Guaranty Trust Bank, Zenith Bank, FBNH, Zenith Bank, UBA and United Capital.
Law Union Insurance and Linkage Assurance were the best-performing stocks during the session, after gaining 9.59% and 4.65% respectively, closing at N0.80 and N0.45 per share on market sentiments. On the flip side, GSK and NCR lost 10% each to close at N4.50 and N2.43 on selloffs.

Market Outlook
We expect the losing momentum to moderate on dividend news and resist further decline as more audited earnings hit the market any moment from now. This is despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying increasing positions in high dividend-paying stocks ahead of dividend declaration. 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 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 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.
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 our 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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