Equities

NSE Sustains Two Trading Session Of Positive Sentiment On Improving Inflows As MFI Looks Up

Market Update for March 4,

At midweek, stocks rallied higher on the Nigerian Stock Exchange on sustained buying interest as market players take advantage of low prices to position for dividend and capital gains ahead of mark down dates for some companies that had declared cash dividends earlier.  This positive sentiments pushed the composite inde higher on above average traded volume.

In today’s market, stocks are yielding more than the fixed income instruments. This sharp divergence in yields should be the attraction in equity segment of the financial market considering the prevailing low interest regime and rising inflation rate. The government suspending its earlier plan to borrow N2 trillion from the pension fund and continued OMO maturities that awashed the system with excess liquidity as institutional investors continued to trade with caution.  But with the money flow index looking up in the last two trading days, indicating that funds are gradually returning to the stock market.   

Despite, the reduce momentum in today’s gain, one may safely conclude that traders are already gaining confidence against the effect of coronavirus.  As global markets are already on a recovery mood just as China where the virus commenced, their capital market and economy are recovering, more so, with the news that, vaccine had already been discovered in Israel to cure the strange virus. Here in Nigeria, the government had consistently assured to be ready to combat the spread of the diseases.   

Meanwhile, Wednesday’s trading opened in green and oscillated in the mid-morning till afternoon on accumulation of dividend stocks and buying of undervalued equities that had suffered losses over the years and recently for capital appreciation, which pushed the benchmark index above intraday high of 26,438.78 basis points, from its low of 26,256.24bps. Thereafter, closing the session higher at 26,415.54bps on a positive market breadth.

Midweek market technicals were positive and mixed, with volume traded lower than the previous session in the midst of breadth favouring the bulls and positive sentiment as revealed by Investdata’s Sentiment Report showing 83% ‘buy’ volume and 17% sell position. The total transaction volume index stood at 1.07, as energy behind the day’s performance remained seriously weak, but Money Flow Index moved up to read 15.40points, from the previous day 8.84points, an indication that funds entered the market again,  despite the prevailing low liquidity in equity segment.

Index and Market Caps

All Share index at the end of the day’s trading  gained  160.43bps, closing at 26,415.54bps from its 26,255.11bps opening, representing a 0.61% growth,  just as market capitalization was up by N83.60 billion to close at N13.76 trillion, from the N13.68 trillion opening level, which also represented a 0.61%  appreciation in value.

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The day advancers was driven by position taking in low, medium and high cap stocks like BUA Cement, Guaranty Trust Bank, Access Bank, UBA, Ecobank Transnational Incorporated, FBNH, NB, and Fidelity Bank. This expectedly impacted positively on the NSE, as the Year-To-Date loss reduce to  1.59%, while market capitalization YTD gain rise  to N806.41 billion, representing 6.19% growth over the year’s opening value.

Bullish Sector Indices

All the sectorial performance indexes were bullish, except for the NSE Oil/Gas that closed lower by 0.68%, while the NSE Insurance index led the advancers, after gaining 2.77%, followed by the NSE Banking and Consumer Goods with 1.7% and 0.82% respectively, just as NSE Industrial goods index was up by 0.37%. .

Market breadth remained positive, with advancers outnumbering decliners in the ratio of 22:10, while market transactions in terms of volume and value traded were down by 20.69% and 44.74% as investors exchanged 307.72 million shares worth N2.81 billion from the previous day  387.9 million units valued at N5.08 billion.  This volume was boosted by trades in FBNH, Zenith Bank, UBA, Guaranty Trust Bank and Trancorp.  

The best performing stocks for the day, were NEM Insurance and Royal Exchange Assurance  that topped table, after gaining 10% each, closing at N1.87 and N0.22 per share on market forces and low price attraction. On the flip side, Ardova and Deap Capital  lost 10% and 8.33% respectively, closing at N15.30 and N0.33 each respectively on selloffs.

Market Outlook

We expect the trend to be sustained as funds may flow the way of stocks, dividend news and resist further decline as more audited earnings hit the market this March. This is despite the likely continuation of the mixed intraday movement in the midst of profit-taking, with investors increasing buying positions in high dividend-paying 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 potentials 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, which was 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 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.

 

Ambrose Omordion

CRO|Investdata Consulting Ltd

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