Market Update for February 3
The benchmark All-Share index of the Nigerian Stock Exchange (NSE) again closed significantly lower on Monday, the first trading session of the month and week, amidst the spread of the coronavirus, while falling oil prices at the international market threaten the global stock markets and economy.
The NSE’s index extended its losing streak for the sixth consecutive day, reflecting apparent concerns among investors over the recent U.S visa ban on Nigeria and the lingering insecurity in the country, as the monetary and fiscal authorities fail to align their policies for a clear economic direction. Add these to the general pattern of the unaudited Q4 and 2019 full-year results released, which are confusing to many investors, given the mixed numbers and the fact that no dividend has been declared so far by December 31 year-end companies.
It is a dicey market at the moment, as negative sentiments of last week extended in the midst of mixed technicals and fundamentals as more companies release their unaudited financial positions which have so far served as an eye-opener to investors. The market is on a correction wave of previous projections and expectations by investors upon which several positions were based before now.
This suggests that the market may remain dull until announcements about dividend payments begin, at a time Money Flow Index has dropped significantly in the last one week, revealing that funds have exited the market significantly, despite rising slightly to read 33.27 from the previous 30.14.
Meanwhile, Monday’s trading started on the downside and was sustained throughout the day on continued negative sentiments and selloffs that pushed the benchmark Index to an intraday low of 28,389.60 basis points, from its high of 28,843.53bps. It thereafter retraced up slightly, before closing lower at 28,533.40bps on a low traded volume.
Market technicals were negative and weak, with volume traded lower than the previous session’s, in the midst of negative market breadth and mixed sentiments as revealed by Investdata’s Sentiment Report showing 68% ‘sell’ volume and32% ‘buy’ position. The day’s total transaction volume index stood at 0.70, while the momentum behind the day’s performance was weak, despite the slight increase in Money Flow Index, an indication that funds left the market, but entered some stocks.
Index and Market Caps
At the end of Monday’s trading, the composite NSEASI lost 310.13bps, closing at 28,533.40bps, from the 28.843.53bps opening, representing 1.08% decline, just as market capitalization depreciated by N159.75bn, closing at N14.7tr, from an opening value of N14.86tr, representing a 1.08% value loss in investors’ portfolios.
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The continued decline was impacted by selloffs in banking stocks, especially Guaranty Trust Bank, Zenith Bank, Access Bank, FBN Holdings, Fidelity Bank, FCMB, Forte Oil, Cadbury, Lafarge Africa, among others, which impacted negatively on the NSE’s Year-to-Date gain, reducing it to 6.30%. Market capitalization, YTD, drop to N1.74tr, representing a 13.42% growth over the year’s opening value.
Bearish Sector Indices
All the sectoral performance indexes were down, led by NSE Banking, with lost 3.85%, followed by Industrial Goods with 1.25%; Oil/Gas, Insurance and Consumer goods with 0.77%, 0.14% and 0.07% respectively.
Market breadth remained negative as decliners outnumbered advancers in the ratio of 24:8, while market activities, in terms of volume and value, dropped by 27.83% and 25.18% respectively to 251.6m shares worth N3.15bn, as against the previous 348.61m units valued at N4.21bn. Volume was driven by transactions in Zenith Bank Guaranty Trust Bank, FCMB, UBA and FBNH.
Law Union & Rock Insurance and Honeywell Flour were the best-performing stocks, gaining 10% and 9.28% respectively to close at N0.77 and N1.08 per share, on market forces and improved sentiments. On the flip side, NCR Nigeria and Forte Oil were the biggest laggards, shedding 9.97% and 9.95% respectively, closing at N2.98 and N18.55 on selloffs and market forces.
We expect this pullback to slow down despite the likely continuation of the mixed intraday movement in the midst of profit-taking and positioning by investors taking advantage of the correction ahead of dividend news. This is also against the backdrop that capital wave in the financial market may persist in the midst of the 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 of the full-year earnings season, targeting companies with strong potential 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, as discussed extensively during the Investdata 2020 Traders & Investors Summit held in Lagos last December.
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 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