Market Update for February 17
It is unfortunate that the nation’s stock market has reversed its earlier bull-run at the beginning of the year due to policy summersaults, with the composite Nigerian Stock Exchange All-Share Index closing lower once again on extended negative sentiments to start the week.
The market, in the last three weeks, has been on the downtrend due to monetary policy tightening in the form of the latest adjustment by the Central Bank of Nigeria to the Cash Reserve Requirements of banks by 500 basis points from 22.5% to 27.5%. As a result of this, the 20-day rally in January was short-lived owing to the policy stance of CBN that triggered an outflow from the equity assets.
The increasing insecurity and slow economic recovery continue to threaten investor confidence, added to the recent happenings in the nation’s political environment, as well as the mixed unaudited Q4 numbers released so far to the market.
Most analysts now are acknowledging the effects of assets rebalancing and the ongoing coronavirus on the global economy and the fact that these have slowed down the outlook for 2020.
Analysts, however, argue that this slowdown is temporary, even as threats posed by weak economic data and bad earnings still exists, this is just as overall mood going into the year remains mixed. Overall, the last three weeks have been dicey and volatile, so any positioning this week should be buy-and-hold, with more companies likely to release their numbers any moment from now.
Meanwhile, Monday’s trading started on the downside and remained in that direction till the afternoon, before oscillating in the late afternoon on buying interests and profit-taking among stocks. This pushed the benchmark index to an intraday low of 27,507.99 basis points, from its high of 27,818.09bps, before retracing marginally to close the session lower at 27,570.94 bps on a low traded volume.
Monday’s market technicals were weak and mixed, as volume traded was slightly higher than the previous session, while market breadth, while sentiments remained negative as revealed by Investdata’s Sentiment Report, showing 20% ‘buy’ volume and 80% ‘sell’ position. The total transaction volume index stood at 0.42, while the momentum behind the day’s performance was seriously weak, despite the Money Flow Index inching up to 4.47 points from the previous day’s 4.27 points. This indicated that the market is lacking liquidity, despite the seeming entrance of funds into some stocks.
Index and Market Caps
At the end of Monday’s trading, the NSEASI lost 184.93bps, closing at 27,570.94bps from its 27.755.85bps opening, representing a 0.67% decline, just as market capitalization dropped by N96.31bn, closing at N14.36tr, from the N14.46tr opening level, which also represented a 0.67% depreciation in value and loss in investors’ portfolios.
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The downturn recorded was impacted by selloffs and profit-taking in Guaranty Trust Bank, Zenith Bank, Dangote Sugar, ETI, Lafarge Africa and Fidelity Bank among others. This impacted negatively on the NSE’s Year-To-Date gain, reducing it to 2.72%. Market capitalization, YTD, gain stood at N1.40 trillion, representing 10.81% growth over the year’s opening value.
Bearish Sector Indices
All the sectoral performance indexes closed in red, except for the NSE Oil/Gas index that closed in green by 0.56%, while NSE Industrial Goods index led the decliners after losing 1.55%, followed by the NSE Banking which fell by 1.46%, ahead of the NSE Consumer Goods and Insurance shedding 1.25% and 0,76% respectively.
Market breadth was negative as decliners outnumbered advancers in the ratio of 18:11, while market transactions in terms of volume and value traded inched by 1.5% and 23.76% respectively to 134.61m shares worth N1.58bn, from the previous 132.62m units valued at N1.28bn. This volume was driven by transactions in Zenith Bank, United Capital, Guaranty Trust Bank, Unilever and UBA.
Jaiz Bank and Japaul Oil were the best-performing stocks, after gaining 6.28% and 5% to close at N0.68 and N0.21 per share respectively on the strength of market hearsay about dividend payout and market forces which triggered impressive but unsustainable earnings. On the flip side, Law Union and Wapic Insurance lost 9.57% and 9.09% respectively, closing at N1.04 and N0.30 on profit-taking in the sector.
We expect dividend news-driven reversal in the market, as the index tested 61.8% Fibonacci retracement on a declining volume traded, with more audited earnings hitting the market any moment from today. This is despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors buying increasing positions 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.
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Tel: 08028164085, 08032055467