Mixed Trading Ahead, As Investors Ride On Pullbacks, Position For Earnings Season

Market Update for January 22
The expected outcome of the two-day meeting of the Central Bank of Nigeria’s Monetary Policy Committee, the first for the year 2020, beginning on Thursday has halted the rally on the Nigerian Stock Exchange, influencing trading patterns since the beginning of the week. This was even as traders and investors remain cautious, given the impact of the CBN’s unconventional monetary policy that has triggered the prevailing low interest in the market, supporting the capital wave in search of higher returns.
The recent filings on insider trading activities in the market have also dampened investor confidence in the market ahead of the MPC’s meeting, as well as full-year earnings reporting season, especially in Access Bank. Nonetheless, the recent pullback in the bank’s share price will create new entry opportunities.
The possibility that the committee could change its policy stance is slim, given that its decision to stimulate the economy is achieving the desired result, except for the inflation rate impacted partly by the continued border closure.
The NSE’s All-Share Index, at the end of the midweek trading, was flat on the strength of continued profit-taking and indecision on the part of market players to extend its two sessions of bear-run on a low traded volume that have prevailed over the past three trading days this week.
We advise that investors to positions in dividend stocks in expectation of full-year earnings, given the high possibility of an immediate rebound if the policy stance remains unchanged.
Meanwhile, Wednesday’s trading started slightly on the upside and pulled back by the mid-morning to midday before oscillating for the rest of the session on profit-taking and last-minute positioning in dividend-paying stocks. This was especially true of the Industrial Goods and Insurance sectors, after the NSE Index touched intraday low of 29,244.41 basis points from its high of 29,488.93bps, before rebounding to close the session slightly lower at 29,458.21bps on negative market breadth.
Midweek’s market technicals were negative and mixed, with volume traded higher than the previous sessions, even as market breadth favoured the bears, on improved buying sentiment, as revealed by Investdata’s Sentiment Report, shows 87% ‘buy’ volume and 13% ‘sell’ position. The day’s total transaction volume index stood at 0.94, while the impetus behind the day’s performance remained strong but slightly down, with Money Flow Index reading 73.50points, from the previous 74.43ps. This is an indication that funds left the market on profit booking and wait-and-see attitude of players.

Index and Market Caps
The composite NSEASI, at the end of the day, lost a marginal 4.55bps, closing at 29,458.29bps from the 29,462.76bps, representing a 0.02% decline, just as market capitalization lost N2.24bn, closing at N15.17tr, from an opening value of N15.18 trillion, representing a 0.02% value loss.
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The day’s decline was impacted by profit-taking in Dangote Cement, MTNN, Lafarge Africa, Zenith Bank, Flourmills and Fidelity Bank among others, which impacted negatively on the NSE’s Year-to-Date gain, reducing it to 9.75%. Market capitalization, YTD, fell to N2.22tr, representing a 17.10% growth over the year’s opening value.

Bullish Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Consumer Goods Index that closed lower by 0.22%, while the NSE Insurance index led the advancers, after gaining 0.86%, followed by the Industrial Goods, Oil/Gas and Banking with 0.41%, 0.36 and 0.13% respectively.
Market breadth remained negative, with decliners outnumbering advancers in the ratio of 18:15, while market activities were mixed, with volume traded up by 15.70% to 312.41m shares, from the previous 272.84m units, while value fell by 1.97% to N3.59bn from the previous day’s N3.71bn. The day’s volume was driven by trades in Austin Laz, Access Bank, GTBank, Zenith Bank and UBA.
The best performers for the session were Law Union & Rock Insurance, as it topped the chart for the third straight session, and Aiico Insurance, which chalked 10% and 8.64% respectively to close at N0.66 and N0.88 per share, on market forces and dividend expectation. On the flip side, Julius Berger and NASCON Allied lost 6.76% and 4.46% respectively, closing at N20.00 and N15.00 on profit-taking.

Market Outlook
The prevailing intraday mixed trend and performance may continue in the midst of profit-taking and positioning by investors taking advantage of the pullbacks, ahead of the MPC meeting outcome and the full-year earnings reports of companies. This is also against the backdrop of the prevailing low-interest rate regime in the money market and mixed economic outlook for 2020, at a time the Presidential Economic Advisory Committee is yet to harmonize monetary and fiscal policies and give clear direction.
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

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