Low Valuation, High Dividend Yield Lure Investors, As Bargain Hunters Return

Market Update for March 22, 2018

It was a spectacular trading session on Nigeria’s equity market on Thursday, as the benchmark All-Share index halted a six-day consistent pullback of mixed investors sentiment but weak inflow that kept the market’s movement in the south direction, irrespective of impressive earnings and dividend payouts announced by the quoted companies.
As INVESTDATA has noted repeatedly, the market’s technical correction had created buy opportunities for bargain hunters to capitalize on the decline and relatively low equity prices to position for short term rally. Money flow index turned the corner, moving north at the end of Thursday’s trading session to signal that funds are again entering the market after several days of seizure apparently to wait for more numbers, especially the blue-chips and banking stocks.
The day’s trading started with a little gap up, but pulled back by the mid-morning when it became obvious that the Nigerian Stock Exchange (NSE) Index was holding support. Thereafter it took off again, and in the process, eliminated some loses from midweek’s low position. That is when it had a very strong intraday rally by the afternoon to hit a high of 41,640.04 basis points from its 41,370.69 low pullback to test, but held once again, and ran up to the session’s highs with about an hour to go, holding on till the close of the day’s session.
This high traded volume that reversed the downtrend should trigger traders and investors demand for stocks in an earnings reporting season, as the market awaits more positive numbers with recommendation of juicy dividend. However, market rebounded in line with INVESTDATA’s expectations as bargain hunters hit the market to take advantage of the high dividend payouts and yields.
Market technicals for the day were strong and positive despite the seeming flat market breadth, with buying pressure improving to 98% on a high volume traded that signals improved investors demand for stocks, while selling position stood at 2%. Volume index was 1.16 with money flow index momentum looking up at 35.65 point from the previous day’s 28.13 points.
The All Share index for the day gained 138.36 points to close at 41,49633.79 basis points after opening at 41,496.25bp, representing a growth of 0.33% on high traded volume that is higher than the previous day’s. Similarly, market capitalisation was up by N195.79bn to close at N15.04tr from an opening value of N14.85tr which also represented a 0.33% value gain.
The upturn resulted from value gain in stocks like Fidelity Bank, FCMB, PZ Cussons, UBA, Nigerian Breweries, Zenith Bank, Guaranty Trust Bank, Dangote Flour, Flourmills and Stanbic IBTC. This expectedly impacted positively on the NSE’s Year-To-Date returns, which rose to 8.87%, just as market capitalisation gains for the period stood at N1.43tr, representing a 10.51% YTD growth.
The market’s composite index and other market indices were higher except for the NSE AseM that closed lower. Market breadth for the day was slightly positive as advancers outnumbered decliners in the ratio of 29:28, while market activities rose in volume and value by 11.0% and 30.2% respectively to 542.35m shares, worth N7.35bn from the previous day’s 488.7m units valued N5.64bn.
Transaction volume was boosted by financial services stocks like: Access Bank, Zenith Bank, GTBank, FBNH and UBA, which witnessed increased trading to top the activity chart.
The best performing stocks was GSK which gained 10.20% to close at N24.30 on the back of the N7.50 per share special dividend proposed and market sentiments, while Japual Oil notched 8.62% at N0.63 after the plethora of profit taking, especially following doubts over the Milost investment in the country. Multverse and Unity Kapital were the worst performers, shedding 8.70% and 8.33% to close at N0.21 and N0.22 respectively on market forces.

Market Outlook
Being the last trading day of the week, profit taking is expected but due to the previous days of downtrend, we foresee the improved sentiment continuing as bargain hunters take opportunities of low prices. This follows expectation of more earnings reports hitting the market up till Friday and beyond, especially as companies have up to Thursday next week as regulatory deadline to submit their December year-end audited results in line with the post-listing rule of the NSE. We do not expect this pullback to linger on, in a recovering economy with the outpouring of stronger corporate earnings, positive economic data and transparent market that is technology driven.
Also, expect repositioning to continue, while profit taking will reduce on the strength of expected payouts and earnings surprises.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing.
We advise investors to allow numbers guide their decisions while repositioning for the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the Chart Summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.
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We say big thanks to all the participants and resources persons that made Investdata Investment education workshop debut in Port Harcourt a success. The trading and investing education train move to Abuja on April 14, 2018.

Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467