Market Update for January 11
Transactions on the Nigerian Stock Exchange kicked off the week on a positive note, thereby halting the loss of the previous session with investors taking stronger buying interest in medium and low cap stocks on positive sentiment.
The composite All-Share index on Monday had a slightly bullish session, at a time of rising oil price in the international market in apparent reaction to the plan by OPEC to effect further production cut that would support the uptrend seen in the commodity. The planned cut may be related to ongoing increased infections rate of the coronavirus, now in its second wave even as vaccines distributions continue.
The expectation that the NSE’s benchmark index would close higher in Q1, should guide market players on how to identify and position in stocks currently selling at a discount, with high margin of safety ahead of the earnings season. Recall that earnings seasons come with different momentums and sentiments from normal trading sessions.
The low traded volume and positive market breadth on Monday, betrayed cautious trading among traders, as well as the changing holding structure as the Money Flow Index and other technical indicators signaled a bearish divergence from benchmark index action. This, is notwithstanding the fact that the market closed marginally positive.
The expected December inflation report from the National Bureau of Statistics (NBS), among other factors will determine how the market would react to the 2020 full earnings season and the level of funds that will flow into equity space at the time. Consequently, investor should play defensive while targeting dividend paying stocks for safety and ensuring balance portfolios.
Meanwhile, Monday trading started on a slightly upside position, and oscillated between the mid-morning and afternoon, on demand for dividend paying stocks across banking, oil/gas, consumer and industrial goods as players continue to reposition their portfolios for the new year and earnings reporting season. This situation pushed the key performance index to an intraday high of 40,150.78 basis points, from its low of 40,095.09bps, before closing above the day’s opening level at 40,150.78bps.
Market technicals for the day were positive and mixed with volume traded higher than the previous day’s in the midst of positive breadth and high buying pressure as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ volume. This was on a total transaction volume index of 0.87 points, just as the impetus behind the day’s performance remained strong, with Money flow index looking down at 75.33pts, from the previous day’s 81.19pts, indicating that funds left the market, despite closing marginally high.
Index and Market Caps
At the closed of Monday’s trading, the NSESASI gained a marginal 30.6 basis points, after opening at 40,120.22bps representing a 0.08% up, just as market capitalization rose by N15.98bn, closing at N20.99 trillion, from opening value of N20.98tr, representing a 0.08% value gain.
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The uptrend was attributed to buying interests in stocks like Zenith Bank, Presco, Ardova, Dangote Sugar, Guinness, UBA, Flourmill, Oando andMay & Baker, among others. This impacted mildly on Year-To-Date loss, which stood at 0.30%, just as YTD gain in market capitalization, represented a 0.84% growth.
Bullish Sector Indices
Performance indexes across the sectors were bullish, with the NSE Insurance closing 0.72% lower, while the NSE Banking led the advancers after gaining 0.91%, followed by Oil/Gas, Industrial and Consumer goods that were higher by 0.85%, 0.46% and 0.42% respectively.
Market breadth remain positive, as advancers outweighed decliners in the ratio of 28:24; just as activities in volume and value terms were mixed as transacted volume was up 0.72% to 335.70 million shares from the previous day 333.31 million united The day’s volume was boosted by Mutual Benefits, Mansard, Wapco, Fidelity Bank and Zenih Bank.
Ardova and MAY/Baker were the best performing stocks during the session, aftergaining 9.79% each, closing at N17.95 and N3.51 per share, on earnings expectations and market sentiments as crude price keep rising. On the flip side, Cutix and BOC Gases lost 10% and 9.96% respectively, at N2.16 and N11.38 per share, on profit taking and market forces.
We expect the mixed performance to continue on profit booking and buying interests in undervalued and dividend-paying stocks ahead of the market major earnings reporting season, especially as low interest rates and oil price oscillation have so far supported the Nigerian economy and equity market. There is also the likelihood of reversal of trend and continuation, as investors position in high yields stocks in the New Year. Also, important is the fact that technical indicators reveal overbought on the weekly and daily chart, while the RSI reads 70 points and above, a situation that supports the likelihood of another correction.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by the quality of Q3 earnings presented, especially by the tier-1 banks, even as analyses of numbers released so far have helped repositioning of investors’ portfolios on the strength of sectoral and company’s performances.
The NSE’s index action and indicators are looking up in the same direction on a very high traded volume and positive buying sentiments.
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 rest of the year.
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