Equities

Mixed Trend, Positive Sentiments On NGSE, Ahead Of 2020 Earnings Season

Market Update for the Week Ended January 8 and Outlook for January 11-15

Nigeria’s stock market sustains positive momentum despite the mixed performance in the first full trading week of 2021 and change in trading pattern as bargain hunting continued ahead of the earnings reporting season and December inflation data.

Profit taking in the last trading session of the week, amidst New Year portfolio repositioning weighed the market down, following which it closed marginally lower on a high traded volume and positive breadth.  

The benchmark NSE All-Share index witnessed a pullback, breaking down the 41,000 psychological lines on profit booking in high cap stocks, while buying interests in dividend-paying companies, medium and low priced equities boosted market breath within the period. This was just as transaction volume revealed new positioning in sectors that were behind during late last year rally.

In equity investment and trading, taking profit is as important as positioning in sound fundamentally stocks. After all, you only make money when you actually close the position and take money off the table.

Notwithstanding the current trend, Investdata believes the market still has some inherent value, for those investors who know where to look. We note that during the outgone year, analysts and investors focused mainly on valuation, even as equity repeatedly made new highs, with questions centered on overvalued stocks and the market’s overbought region.

History has revealed that the nation stock market has been driven and supported by two major factors: the low interest rate regime, and rising crude oil price in the international market. We know that rates are determined by the monetary policy authority, while oil price is a function of demand and supply depending on OPEC regulations. 

These low interest rate and restriction imposed on financial institutions and others, have resulted in the crash in money market rates, as well as lower yields in the fixed income market.

So, if you are a trader or investor willing to zig while other are sagging in the new year, now might be the right time to look at adding some of the 10 golden stocks for 2021 to your portfolio, ready for whatever the new normal will bring in the new year.

Putting it mildly, 2020 was truly a mixed and challenging year for many market players. it was a tale of two markets, even as those who were able to stick to their investment plan following investdata’s buy and sell signal and ignoring market volatility, fared relatively better during the period. Despite the prevailing economic situation, we are profiting and living through as players. We should all count our blessings and proceed to reposition our portfolios, staying with the 10 Golden Stocks for 2021.

In less than 25 trading sessions after the Invest 2021 summit titled: “New Opportunities & New Paths To Profit,” four of Investdata’s 10 Golden Stocks for 2021 have achieved their targets already, giving more than the yield for the 3.7% of the 364-day Treasury Bills at the last auction. This is an indication that participants at our INVEST 2021 SUMMIT held on December 5, 2020, are already in profit.

However, we must warn at this point, that investors should not underestimate the possibility of market correction any time soon, because profit-taking is inevitable, despite the fact that the market has a trading pattern that supports an uptrend. The summary is: anything is still possible, considering the prevailing trade pattern as the index rally outside the upper limit of the Bollinger band. 

Movement Of NSEASI

It was a mixed trading week comprising three up markets and two when investors sold down to take profit, while maintaining a positive sentiment.

The NSEASI opened for the week on the upside Monday, gaining 2.18% due to rekindled bargain hunting and buying sentiment, a trend that was however short-lived, after the benchmark index closed 1.83% the following day. There was however a marginally reversal at the midweek, when the index slipped 0.17%, followed by a rebound on Thursday when the index closed 0.31% higher. The index turned red, shedding 1.18% on Friday on the back of profit booking in the shares of building materials’ making giants- Dangote Cement and Lafarge Cement, as the index lost 0.37% at the end of the week, from previous week’s 5.42% rise, on above average traded volume and positive breadth.

In absolute terms, the index shed 150.50 basis points, closing at 40,120.22bps, after opening the week at 40,270.72bps, touching an intra-week low of 40,004.27bps, from its highs of 41,154.33bps. This resulted from profit taking and increased buying interests in medium cap stocks, just as market capitalization for the period fell by N18bn in the week, closing at N20.98tr, from the previous weekend’s N21.06 tr, representing a 0.38%value loss.

The week’s advancers’ table was dominated by low cap stocks, reflecting the positive buying sentiments, as the trading pattern supports a recovery of the nation’s economy from recession, even as breadth was positive, revealing the higher prices and uptrend among the medium and low priced stocks. During the period, advancers outpaced decliners in the ratio of 50:21 on a mixed sentiment and positive momentum as Money Flow Index read 86.03bps, as against 85.50 points in the previous week. In the period under review also, Vitafoam released its full-year result, offering 70 kobo dividend, as more quoted companies notified the exchange of their closed period for their audited 2020 financials and board meeting.

NSEASI WEEKLY CHART MOVEMENT

The NSE index action was mixed and volatile during the week on positive sentiments, while discerning investors accumulate position among the dividend paying stocks ahead of the 2020 earnings season from February. The NSE index is trading above the 50 and 200-day Moving Average, as well as the seven-day moving average to breakout new resistance levels on a less than average traded volume and high buying pressure. This is likely to continue as more stocks join the rally in the first trading week of the year.

The market’s recovery moves and bull-trend remain strong factors for the market’s continued increase, propelled by the positive momentum. The strong support level to watch out for at this time is the 40,000 region, a breakdown of which will attract new positioning by traders, even as crude oil trades above $55 per barrel in the international market, while government has earmarked N424m for import of the Coronavirus vaccine in Q1  2021. 

However, we envisage a positive outlook while not ruling out profit booking at any moment, after nine straight days of rally. Also, the positive outlook is not out of place, given the expected impact of the border reopening, expected COVID-19 vaccine importation, high liquidity, and extension of the 2020 capital budget implementation. There is also the impact of oil prices increase from the March 2020 low, given the strong Money Flow Index, as MACD remains in the bullish zone on a weekly chart. ‘Buy’ volume for the period stood at 44% and sell position at 55% with total transaction index at 0.78.

Bullish Sectoral Indices

The week’s performance indexes across sectors were bullish, except for the NSE Industrial Goods that closed 2.29% lower, while the NSE Oil/Gas led the advancers after gaining 13.16%, followed by Insurance, Banking and Consumer Goods that closed 9.46%, 3.21% and 2.58% higher respectively.

The general market outlook remains strong and mixed in the short-term; following which investors should take short and medium-term positions, while diversifying their portfolio along long-term trades to protect capital. This, they can do, by considering sectors with high upside potentials on the strength of earnings and policy influence. The recent market rally calls for value investing as numbers from some companies and sectors were expectedly mixed, given the negative impact of the COVID-19 pandemic and the arson that followed the #EndSARS protests on full-year results, as revealed by the macroeconomic indices.

Activities in volume and value terms were mixed, with transaction volume jumping by 87.3% to 3.39bn shares, from the previous week’s 1.81bn units, while value fell to N19.87bn from N25.97 bn. Volume was driven by trades in the Consumer Goods, Financial Services and Conglomerates sectors, particularly Champion Breweries, Transcorp, Access Bank, Zenith Bank and FBNH.

The best performing stocks during the week were Japaul Gold and BOC Gases as they garnered 56.45% and 32.18% respectively at N0.97 and N12.65 each on market sentiments, while Deap Capital and Royal Exchange lost 12% and 11.54% respectively, at N0.22 and N0.23 per share on market forces. 

Market Outlook

We expect the mixed performance to continue on profit booking and buying interests in undervalued and dividend-paying stocks ahead of the market’s major earnings reporting season, especially as low interest rates and oil price oscillation have so far supported the Nigerian economy and equity market. There is also the likelihood of reversal of trend and continuation, as investors position in high yields stocks in the New Year. Equally important is the fact that technical indicators reveal overbought on the weekly and daily chart, while the RSI reads 70 points and above, a situation that supports the likelihood of another correction.

There is also the expected economic data, as well as the ongoing portfolio repositioning ahead of the 2020 full-year earnings reporting season in Q1 of 2021.

Meanwhile, the home study packs on INVEST 2021 New Opportunities & New Paths To Profits Summit materials and 10 Golden Stocks for 2021, Strategies and How to invest profitably in this Changing Market Dynamics/ Recession, Mastering Earnings Season For Profitable Investing and Trading in any market situation/ cycles, Life Beyond COVID 19 Investment Opportunities In The Stock Market are now available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08179547605, 08111811223 now.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdataonline.com

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467

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