NGSE Index Still On Recovery Mood, As Q4 Filings Reduce Speculations, Guide Position Taking

Market Update for February 12
Midweek’s trading activities on the Nigerian Stock Exchange sustained a seeming uptrend with the composite All-Share index closing marginally up on mixed sentiments and buying interests in dividend stocks, as market players await full-year audited earnings with dividend declaration. It is evident now that the unaudited accounts so far released in line with the directive of the Securities and Exchange Commission have given insights into what investors should expect from the quoted companies.
So far, also, the NSE has suffered from the twin effects of Monetary policy tightening through last month’s upward adjustment of the Cash Reserve Requirements (CRR) by the Central Bank of Nigeria (CBN), just as the directive that companies file their Q4 financials has deflated speculative trading in the new year. The new pattern of reporting triggered selloff, as the Q4 numbers came without corporate actions because they are unaudited, even as most players and investors may not have been carried along in the changes made.
Like we have always maintained in Investdata, there is hope for the market, at a time interest rate in the money market remains relatively low, vis-à-vis inflation rate, even as the new Finance Act is expected to boost the bottom-line of some companies at the end of the day. Nigeria’s macroeconomic indices are expected to look up on the early implementation of the 2020 budget, even as the stock market is expected to be further propelled by the planned demutualization of the NSE, which will give life to huge dead capital in the hands of market players.
Midweek’s trading started slightly on the upside into the mid-morning and oscillated between midday to the afternoon on bargain hunting and profit-taking among stocks which pushed the benchmark index to an intraday high of 27,919.10bps, from its low of 27,866.46bps. It closed marginally high at 27,874.31bps thereafter on a low traded volume.
Market technicals on Wednesday were positive and mixed, with lower volume traded than the previous session in the midst of negative market breadth and mixed sentiments as revealed by Investdata’s Sentiment Report showing 23% ‘buy’ volume and 77% ‘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 8.80 points from the previous day’s 10.08 point, indicating that funds exited the market and some stocks despite closing up.

Index and Market Caps
At the close of midweek trading, the NSE All-Share Index gained a marginal 6.53bps, closing at 27,874.31bps from its 27.871.90bps opening, representing 0.02% up, just as market capitalization was up by N3.4bn, closing at N14.52tr, from the N14.52tr opening figure, which also represented a 0.02% value gain.
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The day upturn was impacted by positioning in dividend stocks and others like Access Bank, FBNH, UACN, Lafarge Africa, Ecobank Transnational Incorporated, Dangote Sugar, Fidelity Bank, Africa Prudential, and C&I Leasing, among others. This impacted mildly on the NSE’s Year-To-Date gain, which increased to 3.86%. Market capitalization, YTD, gain inched up to N1.52tr, representing 11.34% growth over the year’s opening value.

Mixed Sector Indices
The sectoral performance indexes were largely bullish, except for the NSE Consumer Goods and Insurance indexes that closed 0.31% and 0.23% lower respectively, while the NSE Banking led the advancers after gaining 0.30%, followed by Industrial Goods with 0.08%, while Oil/Gas closed flat.
Market breadth was negative as decliners outnumbered advancers in the ratio of 18:13, while market activities in volume and value traded declined by 44.84% and 34.29% respectively to 152.4m shares worth N2.44bn, from the previous day’s 276.27m units valued at N2.85bn. Volume was driven by transactions in Guaranty Trust Bank, Zenith Bank, UBA, FBHN and Fidelity Bank.
C & I leasing and Africa Prudential were the best-performing stocks, gaining 9.09% and 2.17% to close at N5.40 and N4.70 per share, on the strength of earnings expectations and market forces. On the flip side, SKYAVN and Royal Exchange Assurance lost 9.50% and 8.00% respectively, closing at N3.05 and N0.23 on selloffs and profit-taking.

Market Outlook
We expect the market to sustain its reversal, 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 rate 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.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467

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