Mixed Trading Ahead, As Investors Review Likely Impacts Economic Measures, Juicy Dividend Yields

Market Update for March 19
The trading volatility and negative sentiments on the Nigerian Stock Exchange (NSE)on Thursday reversed the attempted recovery, amidst diminishing selloffs in the previous sessions. The equity market turmoil has also resulted in a glut, as fearful investors and players rush to sell so as to stockpile cash that would carry them through these troubled economic times whose terminal date remains unknown. Intelligent and discerning investors are, however, taking advantage of the depressed stock prices to position in value companies with high and juicy margins of safety.
The selloffs on Thursday hit highly capitalized stocks, particularly in banking, telecommunication, consumer and industrial goods sectors on a day four new cases of the coronavirus decease was recorded in Lagos, propelling further panic selling even at the peak of earnings season. The plunge was despite the seeming rebound in crude oil prices in the international market.
The continued decline in the stock market indicators, despite the N1.1tr stimulus promised by the Central Bank of Nigeria for key economic sectors such as manufacturing, for import substitution, a situation that could be signaling that investors and consumers alike are apprehensive still, notwithstanding, the Federal Government’s palliative measures aimed at mitigating effects of the pandemic. Recall that besides the CBN’s offer (READ MORE), the government has adjusted Nigeria’s 2020 budget downward by N1.5tr, while crude oil benchmark has been reduced to $30 per barrel, which in itself is a confirmation that the year may be tough for the economy. The dwindling investor and consumer confidence is equally reflected in the fact that the market failed to take note of the N20 cut in the pump price of Premium Motor Spirit, popularly called petrol to N125 per litre, even as we note that most fuel stations around cities are yet to adjust their pumps to the new price.
Thursday’strading opened on the downside and was sustained throughout the day on strong negative sentiments, in addition to the price adjustment of some stocks for dividends. This pushed the NSE’s composite All-Share index to an intraday low of 22,018.58 basis points, from its high of 22,785.19bps, before retracing up slightly to close the session lower at 22,078.58bps on a high traded volume.
Market technicals for the day were negative and mixed, as volume traded was lower than previous day’s amidst of breadth favoring the bears and high selling pressure, as revealed by Investdata’s Daily Sentiment Report, showing ‘sell’ volume of 100%, on a total daily transaction volume index of 1.25. The momentum behind the day’s performance was seriously weak, with Money Flow Index marginally down to 21.57 points, from the previous session’s 21.66bps, an indication that funds left some stocks and the market. The current stock prices and Price/Earnings ratio of the market continue to reveal the presence of robust intrinsic value for medium and long-term investment considerations.

Index and Market Caps
At the end of Thursday’s trading, the NSEASI closed lost another 711.06bps, closing at 22,078.58ps, from its opening figure of 22,789.64bps, representing a 3.12% decline, just as market capitalization fell by N370.55bn, closing at N11.51tr, from the N11.88tr opening value which also represented 3.12% value loss.
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Thursday’s downturn was driven by selloffs in high cap stocks like Dangote Cement, MTNNigeria, Nestle Nigeria, Guaranty Trust Bank, Zenith Bank, UBA, Lafarge Africa, Access Bank, Ecobank Transnational Incorporated, United Capital and Fidelity Bank. This impacted negatively on the NSE Year-To-Date loss as it increased to 17.75%, while market capitalization YTD negative position up at N1.45tr, representing an 11.21% decline over the year’s opening value.

Bearish Sector Indices
The sectorial performance indexes were down, except for the NSE Insurance that closed 1.08% up, while the NSE Banking led the decliners, shedding 7.75%, followed by the NSE Industrial and Consumer Goods index, which lost 1.45% and 0.96% respectively, while NSE Oil/Gas was flat for the session.
Market breadth turned negative as decliners outweighed advancers in the ratio of 22:13, while market activity in terms of volume and value traded fell by 21.7% and 55.16% as investors exchanged 525.85m shares worth N4.74bn, from the previous day’s 671.52munits valued at N10.56bn. The day’s volume was driven by trades in Zenith Bank, Wapic Insurance, Guaranty Trust Bank, FBNH and UBA.
Africa Prudential and Jaiz Bank were the best-performing stocks for the day, gaining 9.91% and 9.76% respectively to close at N3.55 and N0.45 per share on low price attraction and dividend expectation. On the flip side, United Capital and Zenith Bank lost 10% each, closing at N2.34 and N12.15 respectively on profit-taking.

Market Outlook
We expect a mixed performance on low price attraction with investors and traders review the impact of economic measures of the government and its economic managers, even as high dividend yields continue to attract buying interests for investors that want to make 100% returns in 24 months. This is possible if you stick to good stocks by ordering a review of the 10 golden stocks, 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 Omordionm
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467

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