Market Update for March 25
The power and role of technology in driving online stock trading was fully demonstrated at midweek’s trading session with the Nigerian Stock Exchange (NSE) commenced remote trading as a measure to curtail the spread of the ravaging Coronavirus that is killing more stock markets and economies than people. The composite All-Share index closed lower on volatile and mixed trading, halting the previous day’s gain on the positive market breadth and lower traded volume.
It is expected that, at this challenging period for the economy, the government and her economic managers would step up implementation of policies and measures already identified among those that can counter the effects of the pandemic. The news of stimulus packages and expected implementation in other nations of the world have started reflecting on their stock markets which just suffered huge losses recently, as it rebounded with big gains in recent days trading. The leadership of the National Assembly met with key Ministers and officials of revenue generating agencies, as well as the governor, Central Bank of Nigeria (CBN), to fashion a more realistic 2020 budget in the light of global realities and international oil price that has fallen below the $57 per barrel benchmark. The Federal Government had earlier cut the benchmark price to $30 per barrel, reducing its spending plan by N1.5tr, while revenue target for the Nigerian Customs Service by 37% from N1.5tr to N943bn, among others.
The seemingly improved buying interest in financial services stocks, consumer and industrial goods failed to push the market up as selloffs in large company shares dragged the key performance index down. This provides buy opportunities for short, medium and long-term investors who understand the power of timing in equity investments, as most listed companies are selling at their 10, or 11-year lows.
Nevertheless, we are of the view that this downturn would not last at these very attractive prices, following which we advise stage-by-stage positioning in fundamentally strong equities.
Wednesday’s trading opened slightly in the green and oscillated between the midmorning and early afternoon as bargain hunting in undervalued stocks continued before the sell-down in MTNN and Total Nigeria pushed the NSE index to an intraday low of 21,663.32 basis points, from its high of 21,814.74bps, before sliding to close the session at 21,729.48bps.
Market technicals for the day were weak and mixed, as volume traded was lower than previous day’s with breadth favoring the bulls, just as there were mixed sentiments, as revealed by Investdata’s Daily Sentiment Report, showing ‘buy’ volume of 44%. ‘Sell’ position stood at 56% on a total daily transaction volume index of 0.53, just as the momentum behind the day’s performance was seriously weak. Money Flow Index dropped to 6.65 points, from the previous session’s 12.30bps, indicating that funds left the market and some stocks.
Index and Market Caps
At the end of Wednesday’s trading, the All-Share index shed 11.68bps, closing at 21.729.48ps, from its opening figure of 21,741.16ps, which represented a 0.05% drop, just as market capitalization lost N6.09bn, closing at N11.32tr, as the N11.33tr opening level which also represented 0.05% value loss.
Midweek’s downturn was driven by selloffs in stocks like MTNN, Total Nigeria, Africa Prudential, FCMB, GSK, and NEM Insurance. This impacted slightly on the NSE index, increasing its Year-To-Date loss to 19.05%, while market capitalization loss stood at N1.64tr, representing a 12.62% decline over the year’s opening value.
Bullish Sector Indices
The sectorial performance indexes were largely bullish except for the NSE Oil/Gas that closed 1.01% lower, while the NSE Banking led the advancers after gaining 2.94%, followed by the NSE Insurance, Industrial and Consumer Goods which were up by 1.43%, 0.35% and 0.17% respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 20:7 just as market transactions in volume and value terms were down by 29.27% and 37.25% respectively, after investors traded 233.47m shares worth N2.24bn from the previous day’s 330.1m units valued at N3.57bn. This volume was boosted by trades in Guaranty Trust Bank, Zenith Bank, Access Bank, UBA and FBNH.
The best-performing stocks for the day were Cutix and Cadbury which topped the advancers table, gaining 10% and 9.71% respectively, closing at N1.32 and N5.65 per share on low price attraction. On the flip side, Total Nigeria and Africa Prudential lost 10% and 9.87% respectively, closing at N96.30 and N3.47 respectively on selloffs and market forces.
We expect mixed performance to continue, as market players cash in on low prices to position ahead of the expected impact of the stimulus package on the economy in the midst of dividend payment by the companies that postponed their Annual General Meetings. However, the high dividend yields continue to attract buying interests, while more audited corporate earnings hit the market going forward. This is despite the likely continuation of the mixed intraday movement in the midst of selloffs, with investors buying increased positions in undervalued 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 potential 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 in the New Year.