Market Update for March 11
The ‘sell’ pressure and volatility on the Nigerian Stock Exchange(NSE) continued at the midweek, despite the seeming slowdown in the losing momentum, as the benchmark All-Share index closed lower, extending the free-fall in stock prices to the fourth consecutive session on the back of a very huge traded volume that suggests dumping by investors, driven by transactions in the banking sector.
It has, so far, been a tumultuous week for the NSE, following which its market capitalization has lost almost N1.5tr in just three trading days due to wobbling market and economic fundamentals.
It is true that the bear market anywhere in the world is driven or triggered by structural and cyclical events. For the Nigerian bear market, it is a combination of structural and events that have driven the downturn.
At this stage, we think the balance is still in favour of economic policy and global happenings decline, suggesting that right and well-articulated economic and government policies will rekindle confidence and interest that will drive all expect recovery.
We believe the proposed new oil production cut agreement at the next meeting of the Organisation of Petroleum Exporting Countries(OPEC)will stem the free-fall in oil prices at the international markets. This will come in handy, at a time stocks continue to lose thousands of points, oil prices are down and Corona Virus is spreading like wildfire, it is time to invest and even down. Discerning investors accumulate when prices are low.
At the midweek, trading on the NSE opened on the downside and was sustained into the midday before oscillating for the rest of the session on mixed sentiments of buying interests and selloffs which pushed the composite index below the 24,000 psychological level to an intraday low of 23,260.07 basis points, from its high of 24,321.51bps. It thereafter rebounded marginally, closing lower at 23,573.75bps.
Market technicals for the day were negative and mixed, with volume traded higher than that of the previous sessions in the midst of negative breadth and sentiments as revealed by Investdata’s Sentiment Report showing 71% ‘sell’ volume and 29% ‘buy’ position. The total transaction volume index stood at 4.08, just as the momentum behind the day’s performance remains weak with the Money Flow Index slipping to 18.72 points, from the previous day’s 21.37points, an indication that funds left the market, as selloffs continued in the midst of low liquidity.
Index and Market Caps
At the close of Wednesday’s trading, the NSEASI lost 815.91bps, closing at 23,573.75bps, from opening figure of 24,388.66bps, representing a 3.35% decline, just as market capitalization shed N425.19bn, closing at N12.28tr, from the N12.71tr opening value, which also represented 3.35% value loss by investors. We, also note the panic selling in some stocks, while investors took positions ahead of dividend payment and news.
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The session’s downturn was impacted by selloffs in medium and high cap stocks like Dangote Cement, Nestle, Guaranty Trust Bank, Zenith Bank, Access Bank, UBN, NASCON Allied, NB, Dangote Sugar, Stanbic IBTC, and Lafarge Africa. This expectedly impacted negatively on the NSE, as its Year-To-Date loss increased to 12.18%, while market capitalization YTD negative position stood at N645.56bn, representing a 5.79% decline over the year’s opening value.
Bearish Sector Indices
All the sectorial performance indexes closed lower, except for the NSE Insurance that closed 2.24% higher, while the NSE Consumer Goods led the decliners, after shedding 4.74%, followed by the NSE Industrial Goods with 3.43% decline, just as NSE Banking and Oil/Gas followed with 2.70% and 0.70% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 20:18, while market activity in terms of volume and value traded soared by 135.59% and 310.24% as investors exchanged 1.39bn shares worth N17.65bn, as against the previous day’s 584.55m units valued at N4.21bn. This volume was driven by trades in Zenith Bank, Guaranty Trust Bank, FBNH, UBA and Wapic Insurance.
The best-performing stocks for the session were Chams and Courtvill Business Solution which topped the advancers table with 10% each, closing at N0.22 and N0.22 per share on market forces. On the flip side, Dangote Cement and Nestle lost 10% each, closing at N153 and N915.30 respectively on selloffs.
We expect the subsiding losing momentum to continue as low prices of stocks and high dividend yields attract buying interest 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 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.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467