Market Update for April 8
Thursday’s transactions on the Nigerian Stock Exchange were mixed and volatile as the composite All-Share index closed marginally higher on a seeming renewed buying interest in banking and high cap stocks that helped the market to sustain the bulls’ dominance for the second consecutive trading session on a low traded volume and slight positive breadth. This is an indication of trend reversal in the midst of the ongoing portfolio reshuffling, amidst Q1 earnings expectations, while qualification and closure dates continue to guide the movement of income investors.
The recent pullbacks in the post-2020 full-year earnings reports and dividend news, corporate action dates of many companies in the month and quarter should guide investors and traders to position as the market resists further decline and is set to reverse. Traders, in particular, should watch out for hot stocks in sectors and industries for profitable trading at this time, especially given that this is the best month and quarter to buy stocks, as revealed by our 20-year NSE market data. This is particularly true at a time the ongoing correction has made the market more attractive for entry, considering the prevailing dividend yields, and irrespective of the increasing volume of activities on the bond market by the government, as well as the rising fixed income yields.
The NSE’s banking index recovered from previous day’s loss as discerning investors take advantage of low prices and correction to position, just as the sector’s earnings performance had revealed its resilience and the undervalued state of many banks that made them attractive for different investment objectives. In the midst of this, investors continue to realign their portfolio with eyes on yield movements in the fixed income market and dividend yields, as the market is likely to do well in this quarter and year, being a vaccine year after the extensive damage to man and economies arising from the novel Coronavirus (COVID-19) to drive global and local economic recovery in the midst of oscillating oil price depending on countries and states policy direction.
The prevailing nation’s subsisting stagflation environment remains a potent threat to investment returns in the financial market, just as the soaring food prices, high pump price of fuel and insecurity across the country continue to drive inflation rate. We note that the equity market remains a dependable hedge against inflation, considering the dividend yield and 10% daily price movement.
That notwithstanding, players should target fundamentally sound stocks with positive technicals, following which we advise investors and traders to play cautiously around the market place. This they can do by allowing their investment objective, entry and exit strategies to guide them, so as to avoid being trapped in any trade.
Meanwhile, Thursday’s trading opened slightly on the downside and oscillated for the rest of the session on buying interests in blue-chips stocks that supported the key performance index. The index, therefore, touched an intraday high of 38,889.35 basis points, from its lows of 38,749.95bps before closing marginally above its opening point at 38,797.83bps.
Market technicals for the day were positive but mixed, with volume traded lower than the previous day’s in the midst of breadth that favours the bulls on a high buying pressure as revealed by Investdata’s Sentiments Report showing 91% ‘buy’ volume and 9% sell position. Total transaction volume index stood at 0.40 points, just as the energy behind the day’s performance became relatively strong. Money Flow Index was up marginally to 62.52pts, from the previous day’s 59.52pts, indicating that funds entered the market.
Index and Market Caps
At the end of Thursday trading, the benchmark NSE All-Share index (ASI) gained a marginal 25.80ps, closing at 38,797.83bps after opening at 38,774.03bps, representing a 0.07% up. Similarly, market capitalization rose slightly by N13.5bn, closing at N20.3tr, from previous day’s N20.29tr, which also represented 0.07% gain.
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The day’s uptrend was boosted by buying interests in Okomu Oil Palm, Guaranty Trust Bank Zenith Bank, Access Bank, and UBA, among others. This impacted mildly on Year-To-Date loss, cutting it to 3.65%, just as market capitalization loss reduced to N752.98bn, or 3.51% below its opening value for the year.
Bullish Sector Indices
Performance indexes across the sectors were bullish, except for the NSE Consumer Goods that closed 0.20% lower, while NSE Banking led the advancers after gaining 2.19%, followed by, Insurance and Energy with 0.60% and 0.40% higher, while industrial goods was flat.
Market breadth was slightly positive from the previous session, as advancers outnumbered decliners in the ratio of 13:12; just as activity in volume and value were down after stockbrokers crossed 145.33m shares worth N1.58bn.
Consolidated Hallmark Insurance and Japaul Gold were the best performing stocks of the session, gaining 9.68% and 9.53% respectively, closing at N0.34 and N0.58 per share respectively on earnings expectation and market forces. On the flip side, Royal Exchange and Jaiz Bank lost 7.69% and 6.00% respectively, closing at N0.36 and N0.62 per share, on profit taking.
Market Outlook
We expect the mixed trend to continue as Q1 corporate earnings starts hitting the market from next week in the face of rising dividend yields and portfolio repositioning and ahead of economic data like inflation rate and Q1 GDP numbers. Also, the pullbacks offer bargain hunters and income investors another opportunity to reposition in high dividend yields and undervalued stocks, as more companies release their full-year and quarterly numbers to support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities, especially given the rising oil prices that have so far supported the economy and equity market. This expectation is also despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by 2020 full numbers and expected 2021 Q1 earnings reports, until the next MPC meeting in May.
The NSE’s index action and indicators are heading in the same direction on a low traded volume and positive buying sentiments in the midst of rising yield in bond and TB.
Also, 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.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08032055467
