Market Update for February 13
Nigeria’s stock market had a very volatile and mixed session, on Thursday, continuing its oscillating trend with the bulls and bears struggling for dominance as day traders take over the market activities, determining trading pattern as a result of which the benchmark All-Share index rises in the morning and bows to sell pressure by the afternoon. The composite NSEASI, therefore, closed lower, halting the previous two sessions of bull-run on a low traded volume as market players await the release of audited results.
The prevailing low trades and activities on the exchange are a clear reflection of indecision among traders and investors as the market searches for direction after the adjustment of Cash Reserve Requirements of banks triggered outflow from the stock market.
The decline was despite the fact that Nigerian Breweries filed its full-year audited report with the directors offering a final dividend of N1.51 per share (READ MORE).
As more OMO bills and bonds mature, it is clear that the bulk will not be eligible for rollover, given the Central Bank of Nigeria policy locking non-bank domestic investors out of the market. Such funds are expected to find their way to other investment outlets including forex and equity markets.
While this could weaken the Naira as more investors shift to the forex market, the high dividend yields and undervalued state of the stock market is also an attraction for equity assets, especially those that are liquid. Despite the marginal rates increase in the Treasury Bills to 3.5%, 4.5%. and 6.5% per annum for the 91, 182 and 364-day tenors respectively. Discerning investors know that the dividend yield of many stocks remains higher in the short to long-term, regardless of the high risk associated with equity investments.
Meanwhile, Thursday’s trading opened slightly on the downside and rebounded between the mid-morning to midday, before oscillating between in the afternoon on bargain hunting and profit-taking among stocks. In the process, the NSE index was dragged to an intraday low of 27,686.34 basis points, from its high of 27,916.64bps, following which the market closed marginally lower at 27,864.84bps on a negative breadth.
Market technicals on Thursday were weak and mixed, with lower volume traded than the previous session while market breadth favoured the bears on improved buying sentiments as revealed by Investdata’s Sentiment Report, showing 78% ‘buy’ volume and 22% ‘sell’ position. The total transaction volume index stood at 0.43, while the energy behind the day’s performance was seriously weak, with the Money Flow Index dropping to 3.90 points from the previous day’s 8.80 points, indicating that funds exited the market and some stocks.
Index and Market Caps
At the close of trading, the NSEASI shed 13.59bps, closing at 27,864.84bps from its 27.878.43bps opening, representing a 0.05% decline, just as market capitalization lost N7.08 billion, closing at N14.51 trillion, from the N14.52trillion opening figure, which also represented a 0.05% value loss.
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The session’s downturn was impacted by profit-taking in MTNN, Zenith Bank, NEM Insurance, UACN, Law Union and Aiico Insurance among others. This impacted negatively on the NSE’s Year-To-Date gain, which reduced to 3.81%. Market capitalization, YTD, gain stood at N1.55tr, representing 11.99% growth over the year’s opening value.
Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Insurance indexes that closed lower respectively, while the Oil/Gas index closed flat.
Market breadth was negative as decliners outnumbered advancers in the ratio of 15:13, while market activities were mixed with volume traded declining slightly by 1.10% to 150,72m share from the previous 152.4m units, while value rose by 14.2% to N2.78bn from the midweek position of N2.44bn. Volume was driven by transactions in Zenith Bank, Flourmills, United Capital, UBA and MTNN.
United Capital and Learn Africa were the best-performing stocks, after gaining 10% and 9.73% to close at N2.86 and N1.24 per share on the strength of earnings expectations and market forces. On the flip side, Law Union and Japual Oil lost 9.84% and 8.33% respectively, closing at N1.10 and N0.22 on profit-taking as released earnings are unsustainable.
We expect the market to sustain its reversal as the index remains between 50% and 61.8% Fibonacci retracement ahead of more audited earnings hitting the market any moment from today, despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying increasing position ahead of dividend news. 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 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 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.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467