Market Update for March 9

NGSE Becomes More Undervalued, Attractive, Amidst Heavy Losses

Market Update for March 9,

After what seemed like a recovery and decreased selloffs last week, Nigeria’s stock market experienced yet another free fall in equity prices, coinciding with the crash in oil prices at the international market, which was due to the impact of coronavirus outbreak. The oil price crash has resulted in a global oil war, with Saudi Arabia worse hit at 27% down as it reacted to the failed production agreement with Russia, throwing the world markets into the red.

The increased sell pressure on Monday pushed the NSE’s benchmark index to new 52-week low on a   negative sentiment and low traded volume, that resulted in the share prices of many companies hitting new 12-months low. They include Guaranty Trust Bank, GSK, Cadbury, Unilever, Nigerian Breweries, Honeywell Flour, Oando, Stanbic IBTC, Transcorp Unity Bank, University Press and Lasaco.

Despite these factors, there are the key elements of dwindling investor confidence, resulting from the seeming lack of good corporate governance and, of course, iliquidity in the equity segment of the financial market. This should surprise many, given expectations that system is awash with liquidity arising from the maturing OMO Bills that cannot be reinvested because of the restrictions placed by the monetary authorities.

Investors have also ignored the undervalued state of the market and impressive payout of many companies that have, so far, released their full-year audited numbers. The poor reaction to high dividend yields in the stock market indicates that something fundamental is wrong. Investdata believes it is the lack of confidence  in the market, as seen in the spate of voluntary delisting of companies in the recent time, especially those unrelated to mergers and acquisition by peers listed on the NSE.

Meanwhile, Monday’s trading opened with a serious gap down and the market remained in the red throughout the session as both fundamentally and high dividend paying stocks suffered losses. This pushed the benchmark NSE All-Share index below the 26,000 mark to an intraday low of 25,648.45 basis points, from its high of 26,141.24bps. It finally closed for the day at 25648.45bps on a low traded volume.

Market technicals for the session were negative and mixed, with volume traded lower than the previous session in the midst of breadth favoring the bears and high selling pressure as revealed by Investdata’s Sentiment Report showing 100% ‘sell’ volume and 0% buy position. The total transaction volume index stood at 0.64, as momentum behind the day’s performance remained weak and flat, with Money Flow Index reading 22.46 points, from the previous day 22.46points. This is an indication that funds did not enter the market as it continued to suffer  low liquidity in the midst of sell down.

Index and Market Caps

At the end of Monday’s trading, NSEASI lost 629.14bps, closing at 25,648.45bps from its 26,279.60bps opening, representing a 2.39% decline,  just as market capitalization fell  by N327.86n closing at N13.37tr, from the N13.67tr opening level, which also represented a 2.38% depreciation in investors portfolios. Also, we note that the  share price of United Capital, Africa Prudential and Infinity Trust Mortgage Bank were adjusted for dividend of 50k, 70k and 0.03kobo respectively.

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Monday’s downturn was driven by selloffs in low, medium and high cap stocks like Guaranty Trust Bank, Access Bank, UBA, Ecobank Transnational Incorporated, FBNH, NB, Unilever, Conoil, Stanbic IBTC, Cadbury, Nahco and Fidelity Bank. This expectedly impacted negatively on the NSE, as the Year-To-Date loss, rose to 4.44%, while market capitalization YTD gain dropped to N432.12bn, representing 3.24% growth over the year’s opening value.

Bearish Sector Indices

ALL the sectorial performance indexes were bearish, except for the NSE Industrial goods that was flat, while the NSE Banking index led the decliners, after losing 8.95%, followed by the NSE Consumer Goods, Insurance and Oil/Gas withe 2.49%, 2.42% and 1.41% respectively.

Market breadth was seriously negative as decliners outnumbering advancers in the ratio of 39:1, while market transactions in terms of volume and value traded were down by 49.14% and 57.12% as investors exchange 185.65m shares worth N1.83bn from the previous day ‘s 361.11m units valued at N4.28bn. This volume was boosted by trades in Zenith Bank, Transcorp, Guaranty Trust Bank, Sky Aviation and Law Union.

The only stock that gained for the session was Consolidated Hallmark Insurance which gained 7.14%, closing at N0.30 per share on market forces and low price attraction. On the flip side, Conoil, Nahco and others lost 10% respectively, closing at N16.20 and N2.25 each on sell down.

Market Outlook

We expect the losses to subside  as funds may flow the way of stocks on low price attraction and  dividend news  as more audited earnings hit the market in this march. 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 dof 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 gsrow 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 possiblecapital 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

info@investdataonline.com

info@investdata.com.ng

amberose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467