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Stock Market up by 0.54% on Tuesday

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Nigerian Stock Exchange, NSE

Trades at the floor of the Nigerian Stock Exchange (NSE) on Tuesday ended on a positive note as the All-share index grew by 0.54% to close at 26,456.39 basis points. A sum of N7.15 billion worth of shares was traded across 4,798 deals leaving the market capitalization at N12.88 trillion.

 

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Top gainers

CCNN Plc top the best-performing stocks on the bourse today as it gained 9.14% to close at N19.1 followed by Union Diagnostic and clinical services, which gained 9.09% to close the day at N0.214. Cornerstone Insurance Plc gained 8.16% to close at N0.53 with Consolidated Hallmark Insurance Plc making the list having recorded 7.69% increase to close at N0.42 while Wema bank Plc rounded off the list with 6.78% to close at N0.63.

Top losers

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Ikeja hotel plc leads the worst-performing stocks today as it shed 9.28% to close at N0.88 followed by Courteville business solutions plc, which lost 8.7% to close the day at N0.21. Lafarge Africa Plc also joined the list of worst-performing stocks with a decline of 3.74% to close at N14.15.

First bank Plc and Jaiz bank Plc rounded off the list with decline of 3.45% each to close at N5.6 and N0.56 respectively.

 

Top trades by volume

Zenith bank plc was the most actively traded stock on the bourse today with trades of 86.5 million shares valued at N1.52 billion across 773 deals, which accounted for 20.8% of the total trade on the stock market. Access bank Plc followed with trades of 73.03 million shares valued at N682.9 million across 307 deals and GTBank traded in 37.1 shares valued at N1.05 billion across 215 deals.

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Nigerian Breweries Plc traded 36.01 million shares valued at N1.69 billion across 79 deals while Fidelity bank Plc completed the list with trades of 17.7 million shares valued at N33.15 million across 102 deals. The top five trades summed up to N5 billion accounting for 69.9% of the total trades on bourse.

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Markets

How to Profit from Directors’ Share Dealing Notifications

The NSE periodically publishes “notification of share dealing by insider”. By typing that into the search window on the NSE website, you arrive at a list of such events. There have been about 74 insider share dealing notifications on the Exchange’s website since January 1, 2020.

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Financial ratios you need for stock analysis, Understanding price multiples and how to use them for stock selection, Bears grip Nigerian bourse ASI Index down 0.71%, How to Profit from Directors’ Share Dealing Notifications.

Stock trading is in a large part, a game of signals. Depending on what strategy you are using, either algorithms, black boxes, fundamental analysis or technical analysis of charting, most traders trade based on signals generated by whatever trading or stock-picking system they use. While signals can be picked from different sources and used from a combination of systems or strategies, one area that can signal a buy or sell is directors’ share dealings.

Information Asymmetry

Asymmetric information arises when one party to an economic transaction has more material knowledge in a transaction than another. This is one of the agency problems in corporate governance. It happens in companies because the directors know and have more knowledge about the financial health of a company than the shareholders.

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Because of that privileged “advanced” knowledge that company directors have about the health and well being of the companies they oversee, investors should take notice of and interest in the buying and selling of company shares by the directors, as such activities can be loaded with profitable entry or exit signals

How to Uncover Directors’ Share Dealings

Insider dealing is a stock trading crime and as such, insiders such like directors send notifications to the regulatory authorities about their intension to buy and sell shares of their companies or the actual transactions. More often than not, the authorities, like the Nigeria Stock Exchange, publish such notifications to keep the public in the loop. The Nigerian Stock Exchange, in particular, publishes “notification of share dealing by insider”. By typing that into the search window on their website, you arrive at a list of such events. There have been about 74 insider share dealing notifications on the Exchange’s website since January 1, 2020.

(READ MORE: AIICO Insurance grows profit by 88% in 2019(Opens in a new browser tab)

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Investment Strategy

It is through those publications that one can gain knowledge of and the thinking of insiders about the direction of a company. For example, in one of the latest of such publications, on May 21, 2020, to be precise, the managing director and CEO of AIICO Insurance, Babatunde Fajemirokun, notified the exchange that he bought 3,769,586 shares of AIICO insurance on May 20th, 2020, at a price of N0.96.  The question that readily comes to mind is why would an MD buy the shares of his company? The common-sense answer, among others, is because he wants to make money from such purchases, and the only way, he can make money is if the share increases in price after the purchases. Therefore, the fact that the managing director, an insider, bought the shares, is an indication that he thinks, based on all the facts that he has or knows about the company, that the shares of the company are bound for an increase in the near future. True to that thinking, the shares of AIICO closed the week at a price of N1.01, giving the MD an unrealized gain of N0.05 per share or N188,479.3 on that transaction, alone. The signaling impact, in this case, is even more glaring when one takes note of the fact that a few days earlier, on May 18th, 2020, the same managing director of AIICO Insurance bought 1,198,330 shares of AIICO at N0.90 per share. In fact, from May 15th through May 20th, the MD bought over 6 million shares of AIICO Insurance. The above case study underscores how following or paying attention to insider share dealings can be used as a trading strategy or one of the ways to discover a stock trading signal.

READ ALSO: IMF considering an “emergency” bailout for Nigeria

How to Invest in International Stocks (1), How to Profit from Directors’ Share Dealing Notifications.

What Research says

It is not only in Nigeria that things of this sort happen, it happens all over the world and it has been happening over a long time, so much such that it had elicited and continues to elicit research interest among academics and analysts. A research conducted by Jaffe (1974) and Finnerty (1976) indicated that using director dealings as a trading signal produced abnormal returns in the months following. This finding has been agreed to by other researchers like Givoly and Palman (1985), and Jeng, Metric, and Zeckhauser (2002), although Grivoly and Palman attributed part of the added return to price increases due to investors mimicking directors.  There are other researches, though, that found out that using directors’ dealings as signals may not yield the required results due to trading costs.

READ ALSO: COVID-19: The ‘New Normal’ for Nigerian aviation industry

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Time is Money

In a not too efficient market, like that of Nigeria, insider or directors share dealings can provide a profitable trading signal, but such signals may not last forever. Therefore, time is of the essence for those who want to explore such trading strategies. The earlier you discover such signals and act on them, the better you will be positioned to derive the benefits that may accrue from them.

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There’s a caveat

Note that this presentation is not and should not be construed as investment advice. Anyone who uses the strategy does so at his/her own risk with no liability of any sort from the author and publisher.

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Economy & Politics

Gold prices rise, as President Trump decides on China today

Gold prices jumped on Friday as China and America’s drift deepened over further moves by China to impose security laws on Hong Kong

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Gold, Gold prices tick up as President Trump decides on China today

Gold prices jumped on Friday as China and America’s drift deepened over further moves by China to impose security laws on Hong Kong, lifting the allure of safe havens amid market uncertainties.

U.S. President Donald Trump’s top economic adviser cautioned the Chinese lately that Hong Kong, which has enjoyed special privileges, may now be treated like China when it comes to financial matters and trade.

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Trump, who had earlier vowed a tough action on China, will hold a news conference today to announce what measures his administration will take.

Spot gold gained about 0.1% at $1,719.63 per ounce, and U.S. gold futures rose 0.4% to $1,734.60.

The friendship between the Americans and Chinese had weakened, since the outbreak of the Covid-19 pandemic.

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President Trump and President Jinping of China have accused each other as a result of issues surrounding the COVID-19 pandemic.

(READ MORE:  Gold records 3-week high, as investors rush to safe haven)

Why do Investors buy Gold? Global Investors most often buy the safe-haven asset in times of uncertainty and use it to hedge against cash (inflationary macros).

Oil prices, Gold prices tick up as President Trump decides on China today

“The possible U.S. response could range from a tearing up of the Phase 1 trade deal and fresh tariffs on China, to milder travel or financial sanctions on Chinese officials,” said Shane Oliver, chief economist at Australian wealth manager AMP to Reuters News.

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“It is seen as a major threat to the rally we’ve had and the recovery,” “If it’s at the relatively mild end, then I don’t think it would derail the recovery bull market, but if it’s at the more extreme end with tariffs and harsh treatment of Hong Kong, then I think it gets more problematic,” Oliver added.

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Cryptocurrency

Ethereum Whales cumulative holdings touch 10-months high, ETH passes $221

Ethereum whale addresses have just touched a 10-month high with the cumulative holdings of the top 100 non-exchange wallets now owning over 21,800,000

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Ethereum,Ethereum Whales Cumulative Holdings Touch 10 Months High, ETH Passes $220

It seems Ethereum whales are having a good time gathering more Ethereum amidst global uncertainty.

Data from Santiment Research Company showed that Ethereum whale addresses have just touched a 10-month high. This is with the cumulative holdings of the top 100 non-exchange wallets that now own over 21,800,000 #Ethereum (About $4.5 billion at current price).

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https://twitter.com /santimentfeed/status/1265852754330697729?s=20

“In the last two days alone, these top whale addresses have added an additional 145,000 Ethereum (about $30,300,000) as the price of Ethereum grew by a bit over 4% in this timeframe,”Santiment Research Company added.

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In addition, data obtained from Coinmarketcap, showed Ethereum is the second most valuable cryptocurrency with a market capitalization of $24.6 billion, trading at $221.61 up 7%, at the time this report.

What are Ethereum whales? In the Ethereum world, traders or investors who own a large number of Ethereum are typically called whales. This means an Ethereum whale would be a single Ethereum address owning around 1,000 Ethereum or more.

(READ MORE: ByteDance, Tiktok’s parent company, now worth over $100 billion(Opens in a new browser tab)

Things you need to know about Ethereum

Ethereum is a cryptocurrency designed for decentralized applications and deployment of smart contracts, which are created and operated without any fraud, interruption, control or interference from a third party.

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Ethereum, second most valuable cryptocurrency, surges more than 88% since March, Ethereum Whales Cumulative Holdings Touch 10 Months High, ETH Passes $220

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Ethereum is a decentralized system, fully independent, and is not under anybody’s authority. It has no pivotal point, and its platform is connected to thousands of its users through their computing system around the world, which means it’s almost impossible for Ethereum to go offline.

 

 

 

 

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