Market Update for May 20
The bull transition on the Nigerian Stock Exchange (NSE) continued at the midweek with the All Share Index extending its gaining streak on improved sentiments and price appreciation in prices.
The high volume traded during the day and positive breadth signaled increased activities of smart money as Money Flow Index rose to 82.33, keeping the market in the path of recovery.
The sustained positive outlook for the third consecutive session as investors reacted to the 2019 full-year score-card of BUA Cement and other blue-chip stocks with fast approaching qualification date for dividend declared by their directors. These have continued to attract funds to the market, considering the high yield of these companies.
With equities continuing to rally, more and more stocks have been rising above their 50 day moving averages since the composite index crossed the 50 DMA two weeks ago, revealing the activities of institutional investors. As of Wednesday’s close, 70.28% of listed companies have closed above their important 50 DMAs.
Meanwhile, Wednesday’s trading started on the upside in the morning, which was sustained throughout despite the volatility on positioning and profit booking that pushed the NSE’s benchmark index to an intraday high of 24,467.28 basis points, from a low of 24,185.62bps, before closing the day higher at 24,452.23bps.
Midweek market technicals were positive and strong, as volume traded was higher than the previous session’s, in the midst of positive breadth and strong buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 95% and sell position of 5%. Total daily transaction volume index stood at 1.48, while the energy behind the day’s performance stayed strong. Money Flow Index read 82.33points, up from the previous 81.51ps, indicating funds are returning to some stocks.
Index and Market Caps
The benchmark performance index at the end of the day trading gained 249.36bps, closing at 24,452.23ps, from the opening level of 24,202.87ps, representing a 1.03% growth, while market capitalisation rose by N129.96bn to close at N12.74tr from the opening value of N12.61tr which represented a 1.03% value gain in investors’ portfolio.
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Wednesday’s, upturn was impacted by gains recorded by Dangote Cement, BUA Cement, Guaranty Trust Bank, Zenith Bank, UACN, Vitafoam, Oando, UBA, FBNH, Unilever, Stanbic IBTC and Transcorp. This impacted positively on the NSE’s benchmark index, reducing its Year-To-Date loss to 8.9%, while market capitalization YTD decline stood at N216.13bn, representing a 1.56% drop from the year’s opening level.
Bullish Sector Indices
All the sectorial performance indexes again were up, just as NSE Banking index led the advancers, after gaining 2.81%. It was followed by the NSE Insurance and Industrial Goods with 1.67% and 1.33% higher, while the NSE Oil/Gas and Consumer Goods was up by 0.12% and 0.10% respectively.
Market breadth, remained positive as advancers outweighed decliners in the ratio of 37:5, while activity in volume and value terms were up by 28.57% and 38.01% respectively, as investors exchanged 436.84m shares worth N5.41bn from the previous day’s 339.76m units valued at N3.92bn. This volume was boosted by trades in Zenith Bank, Access Bank, Zenith Bank, Guinness Nigeria, UBA, Guaranty Trust Bank
Redstar Express and Jaiz Bank were the best-performing stocks for the session after gaining 10% and 9.09%, closing at N3.41 and N0.60 per share on full year earning expectation and market forces. On the flip side, Unity Bank and Union Diagnostic lost 3.85% and 3.23% respectively, closing at N0.50 and N0.30 per share respectively, on selloffs and market forces.
We expect this trend to continue in the face of profit-taking, price adjustment, qualification dates and positioning as players react to the impressive corporate earnings and dividend payouts. This is just as the April inflation numbers and 2020Q1 GDP are expected from the National Bureau of Statistics (NBS), even as MFI reveals improved institutional investors activity in the midst of oil and stocks price recovery.
However, the rising new cases of the coronavirus pandemic spread and its negative impact on the economy remains of grave concern.
However, the market’s high dividend yield continues to attract buying interests, while more audited and unaudited corporate earnings will hit the market, going forward, despite the likely continuation of selloffs. Investors are buying to increase their positions in undervalued stocks ahead of dividend declaration and Q1 numbers. This is also against the backdrop of the fact that the capital wave in the financial markets 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 amidst the changing sentiments in the hope of improved liquidity and positive economic indices that may reverse the current trend. We see investors focusing on the upcoming full-year earnings season, targeting companies with strong potentials to grow their dividend on the strength of their earnings capacity.
Again, the current undervalued state of the market offers 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 going forward.
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.
NB: The home study packs of our Invest 2020 Opportunities and Trade Ideas Summit, containing different Stocks for various investment objectives in 2020 and beyond are available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.
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