Market Update for April 9
It was very serious volatility and a mixed session on the Nigerian Stock Exchange on Thursday as the benchmark All-Share index rally gained strength on increased bargain hunting among the medium and high cap stocks, despite the expected pullback at any moment to retest the strong support.
This was even as the ongoing recovery move is coming amidst the increasing number of Coronavirus (COVID-19) cases across the nation, amidst the encouraging news from the Organisation of Petroleum Exporting Countries (OPEC) that Saudi Arabia and Russia have agreed to cut crude oil production by 20m barrels in the fight against the pandemic. This has helped fuel gains across stock markets this week.
There have been other factors related to anxiety arising from the pandemic over the past 48 hours, especially the announcement by the African Development Bank (AfDB) of its board approval of a US$10bn to mitigate the impact of the scourge on African economies (READ MORE). The report may have watered down the news contained in a report by the World Bank Group on the effect of the plague on African countries, especially that the continent would slip into recession in 2020, the first in 25 years (READ MORE).
The composite NSESI has rallied in three sessions helped by better buying sentiments.
However, whether the profound volatility over the last eight weeks will mute this signal or not, remains a welcome development at this juncture.
Overall, this provides further evidence that the downside momentum that emerged off the February stock market peak has been broken, while internally, the stock market may have started to heal.
While this does not preclude a meaningful re-test of the March lows, it does improve on the prospect that the most damaging elements of the bear market may be in the rearview mirror. While it is very encouraging that the downside momentum has been broken, we now need to see the market build on this with more evidence of broadening participation that more decisively turns momentum on the side of the bulls.
Meanwhile, Thursday’s trading started on the upside and was sustained till midday before intraday oscillation from green to red as demand for stocks outweighed selloffs to push the NSE index to intraday highs of 21,385.85 basis points, from its low of 20,985.63ps, before closing the day higher at 21,384.03bps on less than average traded volume.
Market technicals for the day were positive and mixed as volume traded were lower than the previous day, in the midst of positive market breadth and high buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 100% and a total daily transaction volume index of 0.71. This was just as the impetus behind the day’s performance was seriously weak, despite Money Flow Index moving up to 24.89points, from the previous session’s 17.40ps, indicating that funds entered some stocks and the market at large.
Index and Market Caps
At the close of Thursday trading, the NSE’s All-Share index gained 310.77bps, closing at 21,384.03 after opening at 21,073.26ps, representing a 1.47% growth, just as market capitalization went up by N161.96bn to N11.14tr, from the N10.98tr it opened, also representing a 1.47% value gain in investor’s portfolio.
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Thursday’s upturn was impacted by bargain hunting in medium and highly capitalized stocks like Seplat, Nestle, Guaranty Trust Bank, Zenith Bank, UBA, Stanbic IBTC, Lafarge Africa, Cadbury, Ecobank Transnational Incorporated and Dangote Sugar. This impacted positively on the NSE index, reducing its Year-To-Date loss to 20.33%, while market capitalization YTD reduced to N1.83tr representing a 13.66% drop from the year’s opening value.
Bullish Sector Indices
All the sectorial indexes closed higher at the end of the session, except for the NSE Industrial Goods Index that closed 0.57% down, while the NSE Consumer goods index led the advancers after gaining 5.03%, followed by the NSE Banking, Oil/Gas and Insurance that closed 3.96%, 1.36% and 0.32% up respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 24:12, just as market activities in volume and value were down by 9.97% and 3.78% respectively, with investors exchanging 314.91m shares worth N5.02bn as against the previous session’s 346.41m units valued at N5.22bn. This volume was driven by trades in FBNH, UBA, Lafarge Africa, Guaranty Trust Bank, and Zenith Bank.
Dangote Sugar and UBA were the best-performing stocks of the day, gaining 9.74% and 9.73% respectively, and closing at N10.70 and N6.20 per share on dividend expectations and low price attractions. On the flip side, Omatex and Chams lost 8.82% and 8.70% closing at N0.31 and N0.21 per share respectively, on selloff and market forces.
We expect the mixed intraday trend to continue, as short-term profit-taking from this few sessions of a rally is underway. Just as market players’ take strategic positions ahead of Q1 2020 earnings reports and impacts of the stimulus package on the economy. Also, more companies are notifying the exchange and investors of their virtual annual general meetings and closed period for 2020 first-quarter earnings reports.
However, the high dividend yields continue to attract buying interests, while more audited corporate earnings hit the market going forward. This is despite the likely continuation of the selloffs, with investors buying to increase their positions in undervalued 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 undervalue 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 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.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467