Mixed Performance May Continue Amidst Profit-taking, Positioning In Value Stocks

Market Update for January 28
The Nigerian Stock Exchange NSE), again closed lower on Tuesday as players extended their profit-taking, as reactions to last week’s decision of the Monetary Policy Committee meeting, especially the adjustment of the Cash Reserve Requirement of banks continued, taming the rising trend in inflation while controlling excess liquidity in the financial system. This has sustained the seeming correction, amidst assets repricing and rebalancing, with more companies presenting their unaudited financials for Q4 ended December 31, along with the unaudited full-year 2019. These are expected to give investors an insight into what to expect between now and March 31, the 90-day deadline for filing audited account.
Nine companies released their quarterly earnings reports on Tuesday, a breakdown of which showed that Q3 numbers came from Red Star Express, Airtel Africa and Chellarams, while Q4 results came from CAP, SAHCO, Total Nigeria, Ekocorp, Abbey Mortgagee and Tourist Company. Zenith Bank and UBA notified the market of their board’s approval of the 2019 financial year results, which have been forwarded to the Central Bank of Nigeria for approval before being releasing it to the exchange.
Technically the market is set for correction before another breakout on continued recovery, following which investors should be ready to face the realities of several expectations ahead of the 2019 full-year earnings season. We believe that company scorecards will largely dictate the market direction at this point, regardless of other fundamental factors. We advise investors and traders to watch their position and take profit to avoid unexpected losses.
Tuesday’s trading started slightly on the downside in the morning and was sustained throughout the session on a negative sentiment that pushed the NSE Index to an intraday low of 29,347.09 basis points from its high of 29,529.60bps. It thereafter retraced up marginally but finished the day lower at 29,378.63bps on a low traded volume.
The session’s market technicals were negative with lower volume traded than the previous session’s, in the midst of market breadth that favoured the bears, besides the negative sentiments as revealed by Investdata’s Sentiment Report showing 83% ‘sell’ volume and 17% ‘buy’ position. The day’s total transaction volume index stood at 0.73, while the impetus behind the day’s performance remained relatively strong, even while declining further. Money Flow Index read 53.75points, from the previous 62.26ps, an indication that funds exited the market and some stocks.

Index and Market Caps
NSE composite All-Share index lost 174.37bps, closing at 29,378.63bps from the 29,552.99bps of the previous session, representing a 0.59% decline. Market capitalization depreciated by N89.81bn, closing at N15.13tr, from an opening value of N15.22tr, representing a 0.59% value loss.
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Tuesday’s downturn was driven by profit-taking and selloffs in Guaranty Trust Bank, UBN, Total Nigeria, Honeywell Flour, Flourmills, and Oando, among others, which impacted negatively on the NSE’s Year-to-Date gain, as it reduced to 9.45%. Market capitalization, YTD, drop to N2.17 trillion, representing a 16.78% growth over the year’s opening value.

Bearish Sector Indices
The sectoral performance indexes were bearish, except for the NSE Insurance Index that closed 1.54% green, while the NSE Banking index led the decliners, after losing 2.18%, followed by Oil/Gas, Industrial, and Consumer goods with 1.35%, 0.57%, and 0.28%, respectively.
Market breadth was negative as decliners outnumbered advancers in the ratio of 20:8, while transactions in terms of volume and value were mixed as volume traded decreased by 43.49% to 250.93m shares, from the previous 444.04m units. The transaction value was up by 44.18% to N4.83bn, from the previous day’s N3.35bn. The day’s volume was driven by transactions in Stanbic IBTC, Fidelity Bank, Guaranty Trust Bank, FCMB and Julius Berger
Julius Berger and Nahco were the best-performing stocks, gaining 9.93% and 9.67% respectively to close at N22.15 and N2.95 per share, on the impressive earnings and expectation. On the flip side, ABC Transport and GSK lost 9.76% and 9.17% respectively, closing at N0.37 and N5.45 on profit-taking and market forces.

Market Outlook
We expect the mixed performance to continue in the midst of profit-taking and positioning by investors taking advantage of the pullbacks, even as players interpret and analyze the impact of last week’s CRR adjustment, ahead of the full-year earnings reporting season. This is also against the backdrop that capital wave in the financial market may change in the midst of the 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 had pushed the market out of the bearish zone.
We see investors focusing on the upcoming of the 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 last December.
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 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