Post Views: 206 Market Update for July 23, 2018 More than 90% of the entire listed companies are set to report quarterly earnings this week ahead of t...
Market Update for July 23, 2018
More than 90% of the entire listed companies are set to report quarterly earnings this week ahead of the statutory deadline of July 31 in order to avoid penalty for late filing, except for the interim dividend paying companies, especially those that will audit their account and have primary regulators approve before submission to the Nigerian Stock Exchange (NSE).
So far, 27 of the largest companies in the high cap stocks category are yet to report their numbers. This in itself suggests that the period between now and end of the month (Tuesday, July 31), will be a busy one as the earnings needed to support the expected rebound would pour in. The support would however depend on whether the numbers beat analysts and investors’ expectations.
Meanwhile, the stock market had a very good session as it trading opened for the week on Monday positive, with National Salt and NEM Insurance releasing numbers that were mild in performance as growth recorded against the comparable period came below average.
First, there was a little gap up on the NSE, with the index spiking higher at the mid-morning session into midday, from intraday lows of 36.603.44 basis points to highs of 36,713.06bps by the afternoon to consolidate the previous retracement. There was the last-minute marginal pullback that occurred, which brought closed the trading session at 36,711.96bps on low volume traded to reflect the wait-and-see the numbers that reduced panic selloff and flight for safety.
The all expected inflation report for the month of June was released also on Monday by National Bureau of Statistics (NBS) and it came as predicted by analysts, slowing down for the 17th consecutive month to 11.23% year-on-year, from the 11.61% recorded in May. On a month-on-month basis, it inched up to 1.24% from 1.09% in May, signaling that a reversal of the trend is imminent, especially with the sustained situation of insecurity in the country that has forced farmers out of their farms for fear of attack by herdsmen and Boko Haram insurgents.
This continues to heighten the fear of an imminent food shortage that will trigger the price of food items in the months to come, knowing the importance of the food basket inflation model and in the computation of inflation data. With the Central Bank of Nigeria (CBN) holding its Monetary Policy Committee (MPC ) to determine benchmark rates at this time. Expectations are that the committee will chose to retain rate in the face of the lingering economic slowdown that had lasted for two quarters so far, or cut rates by 100 basis point to 13%, thereby propelling economic activities that will boost growth in second half of the year.
Monday’s market technicals were positive, despite the low traded volume in the midst of positive market breadth and sentiments as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ pressure of 99% and ‘sell’ volume at 1%. Volume index was 0.73 of the day’s total transactions.
The momentum behind the day’s market performance rebounded, despite still being weak, as reflected in the money flow index at 27.40 points, an increase from previous day’s 21.72points. This is an indication that funds are entering some stocks as earnings season is at its peak.
Index and Market Cap
At the end of Monday’s trading, the benchmark index gained 108.52bps, closing at 36,711.19bps, after opening at 36,603.44bps, representing a 0.30% growth, just as market capitalization, was up by N39.31bn to close at N13.3tr from an opening value of N13.28tr, also representing 0.30% value gained, to reduce the loss position of investors.
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The upturn recorded was due to price appreciation of high cap stocks like Dangote Cement, Nigerian Breweries, Zenith Bank, Guaranty Trust Bank, FBN Holdings, Nascon, Transcop, Japual Oil, Wema, Fidelity Bank and FCMB. This impacted positively on the NSE’s Year-to-Date return, by reducing it negative position 4.00%. This was just as market capitalization within the period lost N262.43 billion, same as 1.94% below the year’s opening value.
Bullish Sector Performance
Sectorial performance indices were largely bullish, except for the NSE Oil/Gas that was down by 1.66%, while NSE banking, Insurance, consumer goods and industrial goods were up. Market breadth was positive as advancers outnumbered decliners in the ratio of 20:18, to continue two trading sessions of up market.
Market activities were down in volume and value by 66.72% and 43.48% respectively to 226.27m shares worth N2.21bn, from the previous day’s 680 units valued at N3.9bn.
Transactions for the day was boosted by trading in aviation service providers- Medview Air, Transcorp, Zenith Bank, GTBank and Access Bank that witnessed increased trading to top the activity chart.
The best performing stocks for the session were Cutix and Continental Reinsurance that topped the advancers’ table after gaining 10% and 6% respectively to close at N3.30 and N1.59 each, due to their low price and dividend attractions.
On the flip side, Abbey and University Press were the worst performing, losing 10% and 9.80% respectively to close at N1.17 and N2.30 on market forces and trend.
we expect more Q2 earnings reports hit the market. If these numbers beat expectation as some have done, the possibility of short term reversal is high, considering the undervalued nature of equities and the high yields. Investors should review their positions in line with investment goals 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, especially during this season were Q2 interim dividend payment are expected in the market arena very soon.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamental.
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