Market Update for May 6,
The sustained positive sentiment and bull transition on the Nigerian Stock Exchange at midweek further reduced investors loss Year-to-date to 10.15%, after the benchmark All-Share Index closed higher on a positive breadth in the face of new economic realities, following the easing of the lockdown in Lagos and Ogun, as well as the Federal Capital Territory (FCT) Abuja. The improved earnings and profit potentials derivable from the government’s action is expected to boost financial market activities in the midst of fundamental changes and events driven by the ravaging coronavirus (COVID-19).
The eight consecutive upside performance in a bear bull rally is a sign of markup phases which is a bullish sign, but it has entered a short-term overbought region that supports the possibility of a pullback and profit-taking. This is even as the relative strength index reads 68.23 points, while Money Flow Index flattened at 88.39 points looking south. It is true that the $3.4bn loan from the International Monetary Fund (IMF) at 1% interest has pushed up the nation’s reserve, just as future oil contracts are at $40, with the continued easing of restriction worldwide.
This continued rally of the NSE index, while trading above its 50-Day-Moving-Average on a very high traded volume which supports the V-shaped recovery which at the same time, calls for caution on the part of players as profit booking is imminent. Investors should have their exit strategies intact at this period.
Midweek’s trading opened in the green, extending the previous positive outlook and was sustained despite oscillating on increased buying interest across all sectors, pushing the NSE’s All-Share index to an intraday high of 24,154.65bps. It thereby broke out the 24,000 psychological line from a low of 23,807.14ps, and thereafter closed higher at 24,143.37ps.
Midweek’s market technicals were positive and strong with higher volume traded than the previous session, even as breadth favoured the bulls on a high buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 97% and sell position of 3%. Total daily transaction volume index stood at 1.41, just as the energy behind the day’s performance stayed strong with Money Flow Index reading 88.39 points, slightly up from the previous 87.99ps, indicating the entrance of funds in a strong market.
Index and Market Caps
Wednesday’s trading closed up, with the NSE’s benchmark index gained 334.06bps, closing at 24,143.37ps, from the opening level of 23,809.31bps, which represented a 1.40% growth, while market capitalization rose by N174.1bn to N12.58tr, from the opening value of N12.41tr, representing a 1.40% value gain in investors’ portfolios.
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Midweek’s upturn was driven by buying interests in medium and high-cap stocks like Dangote Cement, Guaranty Trust Bank, Zenith Bank, Nigerian Breweries, Flourmills, Ardova, FBNH, Ecobank Transnational Incorporated, UBA, Access Bank, Oando and Wema Bank. This impacted positively on the benchmark index, reducing its Year-To-Date loss to 10.05%, while market capitalization YTD decline stood at N345.98bn, representing a 2.85% drop from the year’s opening level.
Bullish Sector Indices
All the sectorial performance indexes were bullish, with the NSE Banking leading the advancers, after gaining 5.32%, followed by the NSE Insurance with 3.66% up, while Consumer Goods, Oil/Gas and Industrial Goods indexes chalked 1.98%, 1.27%, and 0.64% respectively.
Market breadth, remained positive as advancers outnumbered decliners in the ratio of 35:4, while market transactions in terms of volume and value were mixed as volume rose by 23.60% to 426.64m shares from the previous 345.18m units. The transaction value fell slightly by 3.53% to N4.1bn, from Tuesday’s N4.25bn. The day’s volume was boosted by trades in FBNH, Zenith Bank, Access Bank, Guaranty Trust Bank and Sterling Bank.
Nigerian Breweries and Consolidated Hallmark Insurance were the best-performing stocks, gaining 10% each, closing at N33.00, and N0.33 per share on market forces. On the flip side, C&I Leasing and UACN lost 6% and 3.47% respectively, closing at N4.70 and N6.95per share respectively, on selloffs and profit-taking.
We expect profit-taking as the market’s short-term entered the overbought region, amidst last minutes exits in banking stocks, even as the NSE index broke out the recent resistance level in the course of recovery. This is coming ahead of the 2020Q1 GDP, even as MFI reveals that smart money participation is slowing down as the lockdown is gradually being eased, despite the face of rising virus spread and oscillating oil prices after the crash.
However, the market’s high dividend yield continues to attract buying interests, while more audited corporate earnings hit the market, going forward, despite the likely continuation of selloffs, with investors 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 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 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.
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