Mixed Session, Pullback On NGSE Amidst Profit-taking, As Investors Position For Earnings Season

Market Update for January 16
Stocks, again rebounded on the Nigerian bourse at the end of Thursday’s trading, halting the two previous sessions of profit booking on renewed buying interest and positive sentiment for medium and high cap stocks. This came just as N400bn of Open Market Operation (OMO) investments matured on Wednesday, with a high probability that a sizeable chunk of these funds could flow into the equities market. Recall that not all of the funds can be reinvested in the OMO window given the recent restrictions announced by the Central Bank of Nigeria (CBN), besides the continued decline in money market rates especially Treasury Bills, a situation that supports the ongoing capital wave in search of higher returns. It is known that not all financial market investment windows can be bearish simultaneously.
At the close of Tuesday’s trading session, the benchmark Nigerian Stock Exchange All-Share Index closed higher; despite the relatively low traded volume as equity prices have remained very mobile over the past weeks. This is driven by the hope of improved earnings, continued low-interest-rate regime and the low valuation that made equities assets attractive, considering the high Dividend Yield of the market.
Meanwhile, Thursday’s trading was volatile and mixed, reversing the selling sentiment as the NSE opened slightly in the upside, a situation that lingered till mid-morning before rallying up in the midday to early afternoon and oscillated for the rest of the day to close positive. However, the NSE’s index touched an intraday high of 29,497.97 basis points from its low of 29,062.50bps, before closing the session higher at 29,352.13bps.
The day’s market technicals were positive and mixed, with volume traded slightly higher than the previous session’s, in the midst of positive market breadth and improved demand for stocks, as revealed by Investdata’s Sentiment Report of 67%, buy position and 33% sell volume.
The day’s total transaction volume index stood at 1.21, just as the momentum behind the day’s performance remained strong and even upward-looking as Money Flow Index read 78.67points, as against the previous 73.37ps. This is an indication that funds entered the market.

Index and Market Caps
At the end of Thursday’s trading, the composite NSEASI gained 289.68bps, closing at 29,352.13bps from the 29,082.50bps, representing a 1.00% up, just as market capitalization rose by N150bn, closing at N15.14 trillion from its opening value of N14.99 trillion, representing a 1.00% value gain.
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The upturn recorded resulted from buying interests in Dangote Cement, MTN Nigeria, Zenith Bank, UBA, Guaranty Trust Bank, Dangote Sugar, Access Bank, Ecobank Transnational Incorporated, FBNH, and FCMB, among others. This impacted positively on the NSE’s Year-to-Date gain, increasing it to 9.27%. Market capitalization YTD rose to N2.23tr, representing a 16.70% growth over the year’s opening value.

Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Industrial Goods and Insurance Indexes that closed lower by 1.54% and 1.15% respectively, while the NSE Banking index led the advancers, gaining 2.19%, followed by Oil/Gas and Consumer Goods that rose 0.97% and 0.21% respectively.
Market breadth turned positive with advancers outnumbering decliners in the ratio of 23:16, while market activities were up in volume and value traded by 7.52% and 77.01% respectively at 387.16m shares worth N5.12bn, from the previous day 380.08m units valued at N2.83bn. Volume was driven by trades in shares of Access Bank, Zenith Bank, Lafarge Africa, UBA and Morison Industry.
The best-performing stocks were Livestock Feeds and Forte Oil, after gaining 10% and 8.42% respectively to close at N0.55 and N20.60 per share, on market forces and sentiments. On the flip side, BOC Gas and Caverton lost 10% and 9.97% respectively, closing at N4.95 and N2.62 on profit-taking.

Market Outlook
We expect the mixed performance to continue as the markets react to the December inflation report to be released by the National Bureau of Statistics on Friday morning, in the midst of positioning by investors taking advantage of the price correction. This is also ahead of next week’s first Monetary Policy Committee meeting of the year 2020, as well as the full-year earnings reports of companies. It is also against the backdrop of the prevailing low-interest rate regime in the money market.
Also, investors and traders are positioning in anticipation of the 2019 full-year earnings reports, amidst 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 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