Market Update for the Week Ended September 4 and Outlook for Sept 7-11
The nation’s equity market extended its positive narrative for the seventh successive week on a stronger momentum, driven by dividend information and inflow of funds from other investment windows, owing to the increased negative real rate of returns due to rising inflation. This triggered selloffs in the bond market by foreign and institutional investors in the midst of mismatch policies of the government and its economic managers, even as the continued disconnection of the market rally from economic realities should be a serious concern to investors.
Foreign inflow remains on the decline, even as government’s planned intervention in the wobbling economic situation by injecting N3.3tr to mitigate the impact covid 19 seems mere sloganeering to hoodwink Nigerians. This conclusion is unavoidable, considering the Federal Government’s recent actions particularly the twin hike in electricity tariff and pump price of premium motor spirit (petrol)- major drivers of general price and cost increase, while labour is still slumbering.
Investors have remained on a seemingly wild swing of extreme fear to being greedy over the past five months, a situation that has reflected in the key performance index, calling for cautious trading. One factor that have kept the market upbeat over the past weeks was the expectation of audited half-year reports of banks that audit numbers. These were submitted last week, after the banks had obtained approvals to further delay the release of their result for which they blamed their primary regulator- the Central Bank of Nigeria (CBN). All of the banks that presented their scorecards proposed interim dividend payments, with the exception of Fidelity Bank, which has never paid interim dividend, although it paid it audited the half-year numbers for period end June 30, 2020. Interim dividend payment by all the banks are slated for this month, following which markdown dates begin next week.
The expectation of profit booking and more volatility in the weeks and months ahead are linked to price corrections and repositioning for the expected Q3 earnings season and last quarter of the year, when economic activities are likely to improve amidst increased easing of the lockdown.
Technically, the market trended up on a strong momentum and huge traded volume in the week under review, suggesting a likely continuation of the trend, or that the party is over. Consequently, urge traders to tread carefully at this stage of market rally to avoid a bull trap. This is because technical tools have only signaled short-term overbought region, but are yet to confirm a deeper price correction or pullbacks at this time. Is this rally the BULL TRAP we have been warning about? We wait to see, this week and next, whether equity prices will confirm any new trend or direction.
Finally, volatility is likely to continue, but at a decrease rate, if this is just a short price movement.
Movement Of NSEASI
It was a bullish week of up run for all five trading sessions, extending from the previous week’s bull transition that were propelled by the impressive earnings and positive sentiments for interim dividend payouts by the banks.
The composite NSE All-Share index opened during the period with a slight 0.07% gain, which was sustained on Tuesday and Wednesday as it closed 0.34% and 0.18% up respectively on the back of the earnings and dividend news from UBA and Guaranty Trust Bank. The positive sentiment and buying interest were extended to Thursday and Friday when the NSE index closed 0.20% and 0.37% higher, rounding off the week with cumulative gain of 1.17%, as against the previous week’s 0.33%.
The NSEASI recorded 296.27 basis points gain, after opening at 25,309.37bps, touching an intra-week high of 25,618.48bps from its low of 25,289.10bps on a bull-run and mixed sentiment as first-tier banks submitted their half-year earnings reports. The benchmark index closed the week higher on a recovery path at 25,605.64bps, just as market capitalization rose by N154bn to N13.36tr, from the previous weekend’s N13.2tr, which also represented 1.17% appreciation in value.
During the week, seven companies released their audited quarterly and year-end financials. They include UBA, GTBank, Zenith Bank, Stanbic IBTC, Access Bank, Fidelity Bank, Union Diagnostic, Golden Guinea Brewery, and others. For their corporate action kindly see Investdata Earnings & Price Tracking and corporate actions table for details
The low priced and medium cap stocks dominated the top gainers’ table, reflecting more advancers than decliners in the ratio of 41:19, even as energy behind the week’s performance was relatively strong, the Money Flow Index has started to look down after touching a high of 67.98 points in July 17 to read 64.79bps from 64.77bps in the previous week. Seller and profit takers remained at the corner, as buying pressure persisted on portfolio adjustments and qualification dates ahead.
The NSE index action has finally broken out the first resistance level of 25,600bps to form a symmetrical triangle chart pattern on a weekly time frame, that supports trend continuation or pullback, depending market forces, as major recovery and rally will start when the index breaks out the first green line at 26,253.90bps, with the market touching the 50-Day Moving Average on a huge transaction volume. At the same time, it is trading above the 50% line of Fibonacci retracement that suggests cautious trading, as the earnings reporting season comes to a close with the banks submitting their results last week.
However, we envisage profit taking and mixed trend, as daily and weekly time frame Money flow index have formed multiple and double tops with MACD almost crossing the signal line to bearish zone. The buy volume for the period stood at 96%, and money flow index at 64.79 points.
Bullish Sectoral Indices
Performance indexes across various sectors were bullish, led by the NSE Oil/Gas which gained 3.65%, followed by the Banking index with 2.76%; ahead of the NSE Insurance, consumer and industrial Goods with 1.96%, 1.49% and 0.44% respectively. The general market outlook in recent times remained mixed and bullish in the short-term, following which investors should diversify their portfolio with long-term trades to protect capital, especially by considering sectors such as agribusiness, healthcare, industrial goods, insurance and telecoms, which have shown the most strength.
Transactions for the week, in terms of volume and value, were up by 106.54% and 48.51% respectively to 2.21bn shares worth N10.96bn, from the previous week’s 1.07bn units valued at N7.38bn. Volume for the week was driven by trades in Construction/Real Estate, financial services and conglomerates stocks, especially UACN Property, Zenith Bank, Guaranty Trust Bank, Lasaco Assurance and Transcorp.
Royal Exchange Assurance and Cornerstone Insurance were the best performing stocks for the week, gaining 26.92% and 17.86% respectively, and closing at N0.33 and N0.66 per unit on market forces. Conversely, The Initiates and Lasaco lost 18.57% and 16.13% respectively, closing at N0.57 and N0.26 per share on market forces and price adjustments for the five and three kobo dividends.
Market Outlook
We expect mixed sentiments and trends to continue as investors digest the recently submitted bank earnings and dividend payout to reposition and take profit on the strength of the actual numbers and nation’s GDP contraction and low PMI at 48.5, further confirming the contraction in the economy.
We cannot also rule out investors pricing in government’s policy inconsistencies and weak macroeconomic data, including the latest labour report, hike in electricity tariff and pump price of fuel. Already, inflation has risen above the CBN’s benchmark Monetary Policy Rate (MPR) at 12.5%, even as the declining industrial productivity points to the reality of a recession.
Expect a pullback that will support the upside potential, especially with many fundamentally sound stocks remaining underpriced, and the dividend yield of major blue-chips continuing to look attractive in recent weeks, we expect speculative trading to shape the market’s direction, despite the seeming mixed outlook.
To position for the short to long-term, investors should target fundamentally sound, dividend-paying stocks, for possible capital appreciation in the coming months. Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, the CBN directives, and their impact on the economy in the nearest future.
Meanwhile, the home study packs of Strategies and How to Invest Profitably in This Changing Market Dynamics: Mastering Earnings Season for Profitable Trading and Investing in any market situation/Cycleare available. To obtain your copy send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.
INVESTDATA INVESTORS SUMMIT 2020: BEYOND THE UNCERTAIN TIMES
Theme- Life Beyond COVID: Investment Opportunities in Various Assets Classes
Sub-Topics
- Life Beyond the Pandemic: Personal Financial Planning, Investment and Trading Strategies in a Low Yield Environment (AlhajiGarbaKurfi, MD/CEO, APT Securities & Funds Ltd)
- How to Buy and Sell Stocks Profitably in Recession, Recovery and Boom (Mr Abdul-Rasheed Momoh, Head, Capital Market Trw Stockbrokers Ltd)
- Economic Recovery Scenarios, What’s the Fate of Equities and Other Assets Classes (MrOluwasegunAkinwale, Lead Analyst, Nova Merchant Bank)
- The Paradox of Declining Interest Rate and Rising Inflation: Confusion or New Realities for Investors (Mr. AbiolaRasaq, CSCS)
- The New Thinking in Fixed Income Market: Today and Tomorrow (Mr. KayodeTinuoye, Portfolio Manager, United Capital Asset Management)
- Outlook for Alternative Asset Classes: Where are the ETFs, Commodities, REITS and Real Estate Opportunities (MrTaiwo Yusuf Head, Wealth Management, Meristem)
- Portfolio Restructuring and Rebalancing for Positive Returns Ahead of Market Rebound (Engr. Mike Ekwueme X-Front
- The Power of Earnings Quality, Value and Dividends in Equity Investment (Mr. Ambrose Omordion CRO Investdata Consulting Ltd)
The Summit will provide answers to these Seven question among others
- Where exactly are the opportunities in the equity market, fixed income and others?
- Which sectors or markets provide the post COVID-19 investment opportunities?
- How investors and traders can take advantage of the low interest regime to build profitable portfolios
- What are the prevailing market moves and who are the dominant players?
- What are Smart Money and Retail investors doing?
- Where should investors look to enter the market or exit?
- Is it the same every day, season and year?
Date: September 26, 2020
VENUE: ZOOM
For more details, call 08028164085, 08032055467, 08111811223 now.
Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08032055467
