Profit Taking, Portfolio Adjustments May Persist, As Investors React To Banks’ Earnings, Dividend

Market Update for September 2

The benchmark All Share index of the Nigerian Stock Exchange (NSE) continued its upward movement for the fourth successive trading sessions as investors positioned in interim dividend paying banking stocks that started submitting their financials, barely 24 hours after securing 30-day waivers to delay it.

The numbers, nonetheless, came mixed numbers, with dividend cut that seemingly foretells what the full-year earnings reports of these banks and other could be, looking at the spike in provisions for bad loans so far. This generally reflects the telling effects of the Coronavirus pandemic on the entire economy, as already shown in the contraction in 2020Q2 GDP.

Meanwhile, the half earnings reports of the first-tier banks released so far show how strong and resilient the Nigerian banking sector truly is, despite the dividend cut, the top and bottom lines of Stanbic IBTC Holdings for the half-year rose by 7.83% and 24.72% respectively to N126.57bn and N45.2bn, which translated to earnings per share of N4.20. the bank recommended interim dividend of 40 kobo per share, as against N1.00 paid in the similar period of 2019, representing a 60% decline.  Also, Guaranty Trust Bank presented its half-year scorecard which was also a mixed performance with gross earnings rising marginally from N221.87bn in 2019 to N225.14bn. Profit however declined marginally to N94.27bn, from N99.13bn in the 2019 half-year, despite which the directors maintained the 30 kobo interim dividend paid in the previous year.

The rate of policy mismatch and inconsistency in Nigeria could further deepen the looming recession and delay economic recovery despite the cocktail of intervention packages by the government and Central Bank of Nigeria in critical sectors, due to lack of coordination among economic managers, government agencies and policy makers. This also showed in the fact that while the same government is bailing out the economy with different stimulus packages, an increase in the pump price of premium motor spirit (petrol), was also on Wednesday, September 2, 2020 from N148.50 per liter, to N160, the fourth such price change in five months, the highest in the history of Nigeria. Just the day before, electricity tariff was raised by 175% to N66 from N24 kw/h. These will have direct impact on every facet of life, sending inflation rate skyward across the country in no time, with increased operating cost for businesses and cost of living for individuals and families making cost of living unbearable. Already, inflation rate is 12.82%, while the economy has contracted by 6.1%, with the combination of unemployment and under-employment rates at 55.7%, amidst the growing insecurity across the country.  

Meanwhile, midweek’s trading on the NSE started on the downside, and was sustain till midday before rebounding on position taking in banking and manufacturing stocks, which pushed the NSE index to an intraday high of 25,461.66basis points, from its low of 25,388.82bps. Thereafter, the market closed higher above the opening figure at 25,460bps on a low traded volume.

Midweek’s market technicals were positive and mixed, with lower volume traded than the previous session in the midst of positive breadth and strong buying sentiments, as revealed by Investdata’s Sentiment Report showing 98% ‘buy’ volume and 2% sell position. Total transaction volume index stood at 0.82 points, just as the momentum behind the day’s performance remained relatively strong, with Money Flow Index reading 66.90points, from the previous day’s 67.70 points, an indication that the entry of funds into the market is slowing down, despite the up market.

Index and Market Caps

At the end of Wednesday’s trading, the key performance index gained 46.24bps, closing at 25,460bps, having opened at 25,413.76bps, representing 0.18% rise, just as market capitalization appreciated by N23.99bn to close at N13.28tr, after opening at N13.26tr, also representing a 0.18% value gain.

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The day’s upturn was due to price appreciation in BUA Cement, Guaranty Trust Bank, Stanbic IBTC, Zenith Bank, UBN, Nigerian Breweries, Guinness Nigeria, and Flour Mills, which impacted positively on the index’s reducing Year-To-Date loss to 5.14%. Market capitalization YTD gain climbed to N378.50bn, representing 2.50% above the year’s opening value.

Mixed Sector Indices

The sectorial performance indexes were mixed, with the NSE Insurance and Oil/Gas closing lower by 0.93% and 0.19% respectively, while the NSE Consumer Goods led the advancers after gaining 0.55%, followed by Banking which was up 0.36%, while NSE Industrial Goods was flat.

Market breadth was positive as advancers outnumbered decliners in the ratio of 18:11, market activity in term of volume and value were down by 83.18% and 46.67% respectively, as investors exchanged 181.32m shares worth N1.12bn, as against the previous day’s 1.07bn units valued at N2.1bn, this was driven by trades in Transcorp, Regency Assurance, UBA, Zenith Bank and Royal Exchange Insurance.

Cornerstone Insurance and Union Diagnostic were the best performing stocks for the day after   gaining 8.33% and 8% respectively to close at N0.66 and N2.10 per share on market forces. On the flip side, Academy Press and The Initiates lost 10% each, closing at N0.27 and N0.63 respectively on market forces and price adjustment for dividend.

Market Outlook

We expect the current trend to continue on profit taking and portfolio adjustment as the market reacts to the 40 kobo and 30 kobo interim dividends from Stanbic IBTC Holdings and Guaranty Trust Bank, and looking forward to dividend announcements by Zenith Bank and Access Bank. Recall that the banks have kept the market above its 50-day moving average on a daily time frame.

The mixed intraday movement is likely to persist as the month of September progresses in the midst of window dressing, profit booking and investors repositioning their portfolios ahead of Q3 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, negative Q2 GDP of 6.1% and unstable economic outlook for 2020 as government and its economic managers are going front and back with mismatch polices and action.

Also, investors and traders are positioning in anticipation of interim dividend paying companies 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 portfolio adjustment and rebalancing by targeting companies with strong potentials 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 for the rest of the year.

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Theme- Life Beyond COVID: Investment Opportunities in Various Assets Classes


  1. Life Beyond the Pandemic: Personal Financial Planning, Investment and Trading Strategies in a Low Yield Environment (AlhajiGarbaKurfi, MD/CEO, APT Securities & Funds Ltd)
  2. How to Buy and Sell Stocks Profitably in Recession, Recovery and Boom (Mr Abdul-Rasheed Momoh, Head, Capital Market Trw Stockbrokers Ltd)
  3.  Economic Recovery Scenarios, What’s the Fate of Equities and Other Assets Classes (MrOluwasegunAkinwale, Lead Analyst, Nova Merchant Bank)
  4. The Paradox of Declining Interest Rate and Rising Inflation: Confusion or New Realities for Investors (Mr. AbiolaRasaq, CSCS)
  5. The New Thinking in Fixed Income Market: Today and Tomorrow (Mr. KayodeTinuoye, Portfolio Manager, United Capital Asset Management)
  6.  Outlook for Alternative Asset Classes: Where are the ETFs, Commodities, REITS and Real Estate Opportunities (MrTaiwo Yusuf Head, Wealth Management, Meristem)
  7. Portfolio Restructuring and Rebalancing for Positive Returns Ahead of Market Rebound (Engr. Mike Ekwueme X-Front Traders
  8. The Power of Earnings Quality, Value and Dividends in Equity Investment (Mr. Ambrose Omordion CRO Investdata Consulting Ltd)

The Summit will provide answers to these Seven question among others

  • Where exactly are the opportunities in the equity market, fixed income and others?
  • Which sectors or markets provide the post COVID-19 investment opportunities?
  • How investors and traders can take advantage of the low interest regime to build profitable portfolios
  • What are the prevailing market moves and who are the dominant players?
  • What are Smart Money and Retail investors doing?
  •  Where should investors look to enter the market or exit?
  • Is it the same every day, season and year?

Date: September 26, 2020


For more details, call 08028164085, 08032055467, 08111811223 now.

Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467