Market Update for March 10
It was a turbulent Tuesday on the Nigerian Stock Exchange (NSE), as the composite All-Share index recorded its highest daily loss in more than eight years on a very high traded volume and selloffs among small, medium and large-cap stocks.
The market’s bear-run resulted from several local and foreign factors militating against the nation’s market and economy, including the recent crash in crude oil prices over the global health crisis arising from the ravaging Coronavirus, which has propelled a corporate and sovereign debt crisis, especially among oil-dependent countries like Nigeria.
The fear of a likely devaluation of the Naira, as well as the planned downward review of the 2020 Budget to reflect the new economic realities, particularly given that oil is already trading below the budget benchmark of $57 per barrel, oscillating between $34 and $45. Also, the continued inconsistencies in the policy of the government and its economic managers have weighed down investor confidence as stocks doubled their losses on Tuesday due to fear and a lack of economic policy direction. The lack of coordination between the monetary and fiscal authorities is already playing out in the macroeconomic indices and policy formation.
It is obvious that this current market situation will not last after this panicky sell down that just hit the global and local markets, especially as the Nigerian market is trading at its four-year low in the midst of the 2020 earnings reporting season.
The possibility of rebound at this point is, nonetheless, high considering the fact that equity prices are selling at a discount and the prevailing high dividend yields on the exchange, which is what we termed transfer of wealth, a trend that should be investor-friend if cash is available. This trend also should attract funds and portfolio managers that are thinking long, as many fundamentally sound equities are selling at their new 52-week lows.
Meanwhile, Tuesday’s trading started on a gap down which was sustained throughout as both fundamentally and high dividend-paying stocks bled profusely on massive selloffs that pushed the NSEASI below the 25,000 psychological level to an intraday low of 24,381.88 basis points, from its high of 25,412.57bps. It thereafter retraced up slightly and finished the session lower at 24,388.66bps on a negative breadth.
Tuesday’s market technicals were negative and mixed, with volume traded higher than that of the previous sessions in the midst of breadth favoring the bears, and high selling pressure as revealed by Investdata’s Sentiment Report showing 99% ‘sell’ volume and 1% ‘buy’ position. The total transaction volume index stood at 1.96, as the energy behind the day’s performance remains weak as Money Flow Index slipped to 21.37 points, from the previous day’s 22.46 points, an indication that funds left the market, as sell down continued in the midst of low liquidity.
Index and Market Caps
The benchmark index at the end of Tuesday’s trading recorded a significant loss of 1,258.88bps, closing at 24,388.66bps, from opening figure of 25,648.45bps which represented a 4.91% decline, just as market capitalization lost N656.04bn, closing at N12.71tr, from the N13.37tr opening level, which also represented 4.91% depreciation in investors wealth. We note that panicky investors fearfully excited positions during the session.
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Tuesday’s decline was impacted by selloffs in low, medium and high cap stocks like MTN Nigeria, Guaranty Trust Bank, Access Bank, UBA, NASCON Allied, FBNH, NB, Dangote Sugar, Stanbic IBTC, NAHCO, and Fidelity Bank. This expectedly impacted negatively on the NSE, as its Year-To-Date loss increased to 9.14%, while market capitalization YTD turned negative to N218.56bn, representing a 2.24% decline over the year’s opening value.
Bearish Sector Indices
All the sectorial performance indexes closed red, as the NSE Banking led the decliners, losing all of 12.55%, followed by the NSE Consumer Goods with 4.42% decline, just as Insurance, Industrial Goods and Oil/Gas followed with 2.85%, 1.10%, and 0.93% respectively.
Market breadth was still negative as decliners outnumbered advancers in the ratio of 33:3, while market activity in terms of volume and value traded was up by 21043% and 130.05% as investors exchange 594.55m shares worth N4.21bn from the previous day 185.65m units valued at N1.83bn. Volume was boosted by trades in UBA, FBNH, Guaranty Trust Bank, Fidelity Bank, and Zenith Bank.
Neimeth Pharmaceuticals and Honeywell Flour were the best-performing stocks, as they gained 10% and 3.45% respectively, closing at N0.44 and N0.90 per share on market forces. On the flip side, Dangote Sugar and Stanbic IBTC lost 10% each, closing at N9.90 and N28.35 respectively on panic sell down.
We expect the losses to subside as funds may flow the way of stocks on low price attraction and high dividend yields that cannot be resisted by smart money, as 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 increasing 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 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.
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Tel: 08028164085, 08032055467