Market Update for February 7
Trading activities on the Nigerian Stock Exchange on Thursday was a very interesting and exceptionally strong session, closing higher, while consolidating gains in five trading sessions. This is based on the expected positive earnings reporting season and big expectations from banking stocks due to the sector’s up trending dividend yield.
In addition to the seeming return of smart money to as investors take advantage of the high interest rate and yields, buying bonds partly to offset lower yields abroad, especially after the US Federal Reserve Bank signaled a dovish stance on rates this year. There is also the assumption of limited policy changes in Nigeria should the incumbent All Progressives Congress (APC) government is re-elected. If President Muhammadu Buhari wins, status quo could remain and if it is Atiku Abubakar of the main opposition Peoples Democratic Party (PDP) that wins the ballot, he soundw more pro-market. As such, investors have nothing to lose, especially those taking position in equity market ahead of earnings season. The expected policy changes and reforms after the elections remain points of attraction to traders and investors.
The NSE’s benchmark All Share index started out the day trading with a gap up in the morning, which pulled back marginally in the mid-morning before consolidating at midday. It then retraced up throughout the afternoon session after touching intraday highs of 31,433.49 basis points from a low of 30,817.22bps on strong demand for banking stocks to reverse the negative position of the market year to date loss to positive territory.
Energy behind the day’s market performance was up, as shown by the 51.29bps money flow index, from previous day’s 49.69bps, an indication that funds entered some stocks and the market.
Index and Market Cap
The benchmark NSEASI gained 611.69 bps to close at 31,433.49bps having opened at 30,821.80bps, representing 1.98% growth; while market capitalization rose by N288.11bn at N11.72tr from the opening value of N11.49tr. This represented a 1.98% appreciation in value.
Thursday’s upturn was driven by buying interests in stocks like: Nestle, Dangote Cement, Forte Oil, Guaranty Trust Bank, Zenith Bank and FCMB, among others. This impacted positively to wipe away Year-to-Date loss, to positive position of 0.01%, while market capitalization gained to N1.32bn from the year’s opening level of N11.72tr, representing a 0.01% growth.
Bullish Sectors Indices
The sectorial indexes wer in the green, with the NSE Banking index gaining 5.27% to lead the day, as market breadth was positive with advancers outnumbering decliners in the ratio of 25:13.
Market activities were equally up in volume and value by 21.63% and 21.79%, as 436.75m shares changed hands for N5.88bn, from previous day’s 350.09m units valued at N4.83bn. Transaction volume was driven by financial services and oil stocks like: UBA, Zenith Bank, Access Bank, FCMB and Guaranty Trust Bank.
Forte Oil and Unity Bank were the best performing stocks for the day topping the gainers chart with 10% and 9.76% respectively to close at N29.70 and N0.90 respectively on market forces and sentiment. The flipside was led by McNichols and Trans nationwide Express, shedding 9.58% and 8.7% respectively to close at N0.38 and N0.63 each, on the back of market forces and profit booking.
Short term profit booking is imminent while volatility continues, as investors and traders reposition for 2019 dividend declaration season which is expected to shape market performance after the elections. We advise cautious trading and investing while positioning in fundamentally sound equities.
Volatility will also persist as investors and fund managers reposition their portfolios, with eyes fixed on political space and ahead of full year company earnings position and post-election market dynamics. These are likely to drive prices north, or south, while determining market direction before or after the Presidential Election.
Investors should review their positions in line with their investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals