NGSE’s Bull Transition Continues, On Profit Taking, Interests In Undervalued, Div Stocks

Market Update for January 14

The nation’s stock market advanced further on Thursday as the bullish momentum waxed stronger due t o increased buying interests across the market, ahead of the major earnings reporting season and the December inflation report from the National Bureau of Statistics.

The key performance index closed higher on a very high traded volume and positive breadth, extending its bull-trend for the fourth successive session that revealed moves by smart money to markup prices and sustain market recovery in the New Year.

We note that some sectors and stocks have higher upside potentials with attractive yields, following which investors should target December year-end companies, dividend paying stocks with high payout potentials and prospects of making strong sales or revenue growth in 2021.

The reasons for this wide rotation to value on the Nigerian Stock Exchange is the positive sentiments, improved liquidity, faster vaccines approvals/ distribution, anticipated GDP rebound, and restoration of consumption expected to oil the nation’s economic wheel. Others include: higher oil prices, sustained interventions by the Central Bank of Nigeria (CBN) and the resultant low rates, supportive fiscal policies (intervention in critical sectors, coronavirus packages and others), as well as the mixed earnings expectations.

Thursday’s trading opened on a gap up that was sustained throughout the session, on positive sentiments and demand for dividend paying stocks which pushed the NSE index to an intraday high of 40,963.14 basis points, from its low of 40,345.72bps, before closing above its opening level at 40,963.14bps.

The session’s market technicals were positive and strong as volume traded was higher than the previous day’s in the midst of breadth that favoured the bulls on a high buying pressure as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ volume and total transaction volume index of 1.84 points. Also, energy behind the day’s performance remained relatively strong, with Money flow index turning up at 62.84pts, from the previous day’s 60.60pts, indicating that funds enter the market.

Index and Market Caps

At the end of Thursday trading, the NSE’s benchmark index gained a significant 622.09 basis points to close at 40, 963.14bps after opening at 40,341.05bps, representing a 1.54% growth. Similarly, market capitalization rose by N325.27bn, closing at N21.42tr from N21.09tr, representing a 1.54% appreciation in value.

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Thursday’s upturn was driven by buying interests in Dangote Cement, MTNN, Seplat, NASCON, Ardova, Lafarge Africa, and Access Bank, among others, a situation that impacted positively on Year-To-Date gain, bringing it to 1.72%, just as YTD gain in market capitalization represented a 22.55% growth.

Bullish Sector Indices

Performance indexes across the sectors were bullish with the NSE Insurance leading the advancers after gaining 5.32%, followed by Oil/Gas, Banking, Industrial goods and Consumergoods, that closed 5.15%,2.35%, 1.68% and 0.73% higher respectively. 

Market breadth remained positive, as advancers outweighed decliners in the ratio of 49:7; just as activities in volume and value terms rose by 72.85% and 27.89% with investors exchanging   809.36m shares worth N8.91bn, compared to previous day’s 468.15m units’ value at N6.96bn. The day’s volume was driven Transcorp, Mutual Benefits, Guaranty Trust Bank, Lafarge and FBNH.

The best performing stocks for the day were Champion Breweries and NASCON Allied which gained 9.82% and 9.82% respectively, closing at N1.23 and N17.50 per share, on market sentiments and earnings expectation respectively. On the flip side, Courtville Business Solutions and Neimeth International lost 8.33% and 6.36% respectively, closing at N2.28 and N1.74 per share, on market forces and profit taking.

Market Outlook

We expect the mixed performance and profits taking and the bull transition to continue as revealed by candlestick, just as profit booking and buying interests in undervalued and dividend-paying stocks persist ahead of the market’s major earnings reporting season. This is especially as low interest rates and oil price have so far supported the Nigerian economy and equity market. There is also the likelihood of a reversal in trend and continuation, as investors position in high yields stocks in the New Year. Also, important is the fact that technical indicators reveal overbought on the weekly and daily chart, while the RSI reads 70 points and above, a situation that supports the likelihood of another correction.

However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by the quality of Q3 earnings presented, especially by the tier-1 banks, even as analyses of numbers released so far have helped repositioning of investors’ portfolios on the strength of sectoral and company’s performances.

The NSE’s index action and indicators are looking up in the same direction on a very high traded volume and positive buying sentiments.

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 rest of the year.

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Ambrose Omordion

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08032055467

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