Mixed Session Ahead, Amidst Price Adjustments For Dividends, As Stocks Become Attractive

Market Update for March 18
Trading activities on the Nigerian Stock Exchange at midweek remained volatile and mixed as the key performance indicator turned green, reversing the previous day’s loss, halting two straight sessions of decline on the strength of the undervalued state of many stocks that attracted more buying interests in medium and high cap stocks. This lifted the market higher on positive sentiments for low equity prices, dividend news and the earnings reporting season as enters its peak period.
The Nigerian equity market is evidently going the opposite direction of other global markets which continue their free fall as crude oil prices crashed further to a low of $28.34 in an already depressed global economy with more countries shutting their borders, factories, churches, and schools. This has also resulted in panic shopping and confusion in developed economies, regardless of the stimulus measures unveiled by their governments and central banks to mitigate the effects of the Coronavirus pandemics on their economies.
The Nigerian government, as part of panic measures announced travel ban passengers from 13 countries, including China, US, UK, and 10 others, besides suspending the National Youths Service Corps orientation, and the Edo Sports Festival, following the discovery of five new cases of the pandemic recorded on Wednesday. Also, due to the crash in crude oil price, the Federal Government finally announced a downward adjustment of the pump price premium motor spirit or petrol to N125 per litre, from N145, reflecting the low prices of crude oil in the international market. Given the slump in oil prices, the Nigerian economy is already challenged, especially the implementation of the Federal Government’s 2020 budget.
To lessen the impact of the global health crisis-driven bear market and economic downturn, the Central Bank of Nigeria (CBN), on Wednesday, offered addition N1tr intervention funds to support critical sectors of the economy, including the manufacturing sector for import substitution. There is an additional N100bn to support the health sector in the area of drug manufacturing, procurement of testing kits and nose masks (READ MORE).
Meanwhile, midweek’s trading started slightly on the upside, but turned red between the mid-morning to midday, before rebounding by the early afternoon on strong buying interests in MTN Nigeria, as well as Guaranty Trust Bank, given that it was qualification date for its N2.50 per share dividend. This pushed the NSE All-Share index to an intraday high of 22,804.70 basis points, from its low of 22,118.37bps, before slowing down marginally to close the day higher at 22,789.64bps on positive breadth.
Market technicals for the session were positive and mixed, with volume traded lower than previous day’s amidst a positive market breadth and high buying pressure, as revealed by Investdata’s Daily Sentiment Report, showing ‘buy’ volume of 98%. ‘Sell’ position stood at 2% on total daily transaction volume index of 1.62, just as the impetus behind the day’s performance was seriously weak, while Money Flow Index inched to 21.66 points, from the previous session’s 18.24bps. This indicated that funds entered some stocks and the market, despite the gloomy economic outlook. The current stock prices and the earnings powers of companies as revealed by their half-year Price/Earnings ratios and the general market show that there are high upside potentials for investors who are thinking long-term, as the market’s Price/Earnings ratio stands at 4.86xs

Index and Market Caps
At the end of Wednesday’s trading, the benchmark NSEASI gained 246.57bps, closing at 22,789.64ps, from its opening figure of 22,543.07bps, which represented 1.09% growth, just as market capitalization rose by N128.49bn, closing at N11.88tr, from the N11.75tr opening level which also represented 1.09% appreciation in investors wealth.
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The session upturn was impacted by the demand for medium and high cap stocks like MTN Nigeria, Guaranty Trust Bank, UBA, Cadbury, PZ, Oando, International Breweries, United Capital and Wema Bank. This expectedly impacted positively on the NSE, reducing its Year-To-Date loss to 15.10%, while market capitalization loss stood at N1.08tr, representing an 8.35% decline over the year’s opening value.

Mixed Sector Indices
The sectorial performance indexes were largely bearish, except for the NSE Banking and Oil/Gas that closed 2.07% and 0.84% higher respectively, the while NSE Consumer Goods led the decliners, after shedding 1.53%, followed by the NSE Industrial Goods and Insurance, which lost 1.00% and 0.83% respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 19:14, while market transactions in volume and value terms were mixed. While volume fell by a marginal 1.64% to 671.52m shares from the previous day’s 675.92m units, transaction value climbed 31.26% up to N10.56bn, from Tuesday’s N8.6bn. Volume was boosted by trades in Guaranty Trust Bank, Zenith Bank, Access Bank, FBNH and Stanbic IBTC.
Telecommunications giant, MTNN and Lasaco Assurance were the best-performing stocks as they topped the advancers table, gaining 10% each, closing at N104.50 and N0.22 per share on low price attraction, boosted by the dividend news and market forces. On the flip side, Sterling Bank and Chams lost 10% and 9.10% respectively, closing at N0.99 and N0.22 respectively on selloffs.

Market Outlook
We expect a mixed performance on price adjustments for dividends and low price attraction as investors and traders review the impact of the cocktail of economic measures of the government and its economic managers. As 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 mixed intraday movement in the midst of selloffs, with investors buying increased 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.

Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467

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