NGSE Indicators Inch Further, As Investors Target Sound, Dividend-Paying Stocks


Market Update for December 12

Trading activities on the Nigerian Stock Exchange on Thursday sustained its second day of an upward swing as the benchmark All Share index closed higher on increasing demand for high and medium cap stocks, especially in the financial and manufacturing sectors as reflected in the volume of transactions for the day.

This resulted from the continued capital wave in the financial markets as a result of funds inflows from maturing OMO bills and other fixed-income instruments find its way into the equities or bonds segment after the profit-taking and selloffs that were triggered by Moody’s downgrade of some Nigerian banks.

The nation’s economy has maintained slow growth so far, but ongoing efforts by the monetary authorities are expected to sustain the recovery momentum into the New Year. This will, however, depend on whether the fiscal authorities do the needful to complement the unconventional monetary stance of the Central Bank of Nigeria.

The positive performance of the day supported the expected recovery after the bearish correction that has created entry opportunities for discerning traders and investors, while volume traded is gradually looking up as revealed the ‘buy’ interest seen in banking, and consumer goods’ stocks that had earlier suffered huge losses. Trading in kobo stocks and companies with price action patterns different from the general market is a smart strategy to adopt, given the regular change in market sentiments. The need to probe the fundamentals of individual company fundamentals cannot be overemphasized, given its over 20% influence on price movement, especially as the full-year earnings season of December year-end stocks is just around the corner.

Meanwhile, Thursday’s trading opened on the upside, a situation that was sustained throughout the session on buying interests in high and low cap stocks, pushing the NSE’s benchmark index to an intraday high of 26,579.09 basis points, from its low of 26,434.00bps. Thereafter, it adjusted down slightly to close at 26,569.80bps on a higher traded volume.

Market technicals for the session were positive as volume traded was higher than the previous session, with the breadth favouring the bulls on high buying sentiment, as revealed by Investdata’s sentiment report of 94% ‘buy’ volume and 6% sell position. The day’s total transaction volume index stood at 1.05, as the impetus behind the day’s performance was weak, despite inching up as Money Flow Index read 48.06 points, from the previous 46.13bps. This is an indication that funds entered the general market and some stocks.

Index and Market Caps

The benchmark NSE ASI at the close of Thursday’s trading gained 135.80bps, closing at 26,569.80bps from the 26,434.00bps, representing 0.51% growth, just as market capitalization went up by N65.54bn to close at N12.82tr, from an opening value of N12.76tr, which also represented a 0.51% appreciation in value.

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Thursday’s upturn was driven by demand in stocks like, Guaranty Trust Bank, Zenith Bank,  NB, Presco, Dangote Sugar, UBA, UACN, Oando, and Transcorp, which impacted positively on the NSE’s Year-to-Date loss, which reduced to 15.46%. Market capitalization YTD gain inched up slightly to N1.10tr, representing a 9.36% growth from the year’s opening value of N11.72tr.

Bullish Sector Indices

All sectoral performance indexes closed green, except for the NSE Industrial Goods that dropped by 0.18%, while the NSE Consumer goods led the advancers, after gaining 1.19%, followed by the Banking Index’s 1.10%, just as the NSE Insurance and Oil/Gas inched up by 0.34% and 0.15% respectively.

Market breadth for the day turned positive as advancers outnumbered decliners in the ratio of 17:13, while market activities were up in volume and value traded by 77.38% and 1.58% respectively to 319.69m shares worth N3.07bn, from the previous day’s 180.23m units valued at N3.03bn. This volume was driven by Union Diagnostic, Fidelity Bank, Dangote Cement, Zenith Bank, and UBA.

Presco and Cadbury were the best-performing stocks of the day which chalked 9.51% and 9.35% respectively to close at N41.45 and N9.90 respectively, on low price attraction and market forces. On the flip side, Neimeth Pharmaceuticals and Cutix lost 9.59% and 9.40% respectively, closing at N0.66 and N1.35 on profit-taking.

Market Outlook

Being the last trading day of the week, we expect a sustained mixed performance amidst profit-taking, as investors take advantage of the pullback to position, ahead of the usual Santa Claus and year-end rally as capital flow and repositioning in value stocks continue. There is also the changing sentiment in the expectation of improved liquidity and positive economic indices.

Again, the current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term horizons. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down to usher in 2020, just as was noted in the 10 golden stocks and trading ideas for 2020 discussed last weekend during the Investdata  2020 Traders & Investors Summit.

Also, traders and investors need to change their strategies owing to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.

Meanwhile, we appreciate all that made Invest 2020 Traders and Investors Summit a success. The home study pack will be available next week. To book for the pack, Send Yes or Stock to 08028164085, 08032055467, 08111811223 now.

 Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467