Market Update for September 5
The first full trading week of September opened on a negative note Tuesday, with the benchmark NGX All-Share index closed lower, trading below the 50,000 basis points mark on selling sentiments. This was due to profit taking from the recent bull transition in the midst of buying interests in financial services sector stocks with interim dividend paying policy and low liquidity.
The lower highs recovery of the index was temporarily halted on Monday on an above average traded volume in the face of weak momentum and negative market breadth driven by selloffs and profit-taking across the major sectors ahead of more banking half-year results, the August consumer price index and meeting of the Monetary Policy Committee (MPC) toward the end of month. The index action revealed double reversal pattern, which need to be confirmed as the market opens on Tuesday morning.
That notwithstanding, GTCO released its half-year audited results to the market on Monday, with numbers that appeared mixed with gross earnings growing by more than 15% to N239.29bn, against N207.91bn in the corresponding period of 2021, while bottom line recorded a marginal decline of 2.3% from N79.41bn in 2021 to N77.56bn. The net profit translated to N2.70 earnings per share in 2022, against N2.79 in 2021, with the board offering an interim dividend of 30 kobo per share. Investors reacted as the share price inched up slightly on the release of the result during the session.
At the current phase or market mood, whether an individual stocks or an index, my answer as to when to buy or sell is always based on price actions and the money flow direction. We only want to hold stocks that are increasing, or at least retain their value, while avoiding equities that are in decline. And the toolset to evaluate price action is technical analysis. The contemporary technical analysis that works in the changing volatile market, is what you should adopt. That is why it’s never been more important to join me at the upcoming Q4 Master Class in October, the largest quarterly traders summit in Nigeria. I will be sharing new actionable strategies and real trading education that will arm you with the tools that will help you meet your financial goals for the rest of the year 2022 and beyond.
The pause in the lower highs amidst selling sentiments after testing 50,084.83 basis points on an above average traded volume, signals the possibility of pullbacks, depending on market forces in Tuesday’s trading session, and the remain days in the month of September. These reveals the undervalued state of the market on the strength of the stronger corporate earnings, as seen in the high dividend yields indicating the possibility of a higher payout as a hedge against the soaring inflation.
The volume pattern and price structure in recent days and weeks reveals accumulation in some sectors and individual stocks, as selloffs have slowdown in some other stocks and sectors as money flow index has also suggests that funds are entering the market despite the mixed sentiment and breadth. The prevailing market condition is creating ‘buy’ opportunities for discerning investors and traders that understand stock market dynamics, especially as these companies’ earnings performance beat market expectations to indicate their inherent value and the cheap state of these stocks.
The NGX index’s action as at the end of Monday’s session is still trading above the ‘T line’ and the 20-day moving average, to formed a double top that signal reversal as sector rotation and portfolio rebalancing increased amidst the recent scorecards of many companies on the exchange. It is, therefore, time to use technical tools, if you have been ignoring the charts and fighting the trends, it is your chance to step up your game. At this current market mood, investors and traders should target leaders in the various sectors with strong fundamentals, and positive technicals as the market reversal is underway depending on the earnings power.
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Oil prices pulled back again despite OPEC cutting output to trade at $95.14 per barrel in the international market, following some strong economic data in the midst of recession fear leading to aggressive interest rate actions by central banks across the globe droving bearish sentiment. Despite the bailout package of china’s government to simulate economic activates and stable employment.
Meanwhile, Monday’s trading started slightly on the upside, but oscillated in the afternoon on selloffs and position taking in blue-chips, a situation that pushed the NGX’s index to an intraday low of 49,988.28bps from its highs of 50,084.83ps, before closing slightly below its opening point at 49,991.41bps.
Market technicals were negative and mixed, with lower volume of shares traded than the previous day in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 3% buy volume and 97% sell position. The total transaction volume index stood at 1.06points, just as momentum behind the day’s performance was relatively strong as Money Flow Index is looking flat at 58.59pts, from the previous day’s 58.60pts, indicating that funds did not leave the market.
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Index and Market Caps
The key performance NGX All Share index, at the end of the day trading shed 54.42bps, closing at 49,991.41bps, after opening at 50,045.83bps, representing a 0.11% drop, just as market capitalization fell by N29.13bn, closing at N26.97tr, from the previous day’s N26.99tr, which also represented a 0.11% value loss.
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Monday’s downturn was driven by profit taking and selloffs in Lafarge Africa, NGXGroup, Zenith Bank, UBA, Cutix, FBNH, United Capital, International Breweries, Sterling Bank and ABC Transport, among others, which impacted mildly on Year-To-Date gain, which reduced to 17.03%. Market capitalization gain YTD also rose to N3.43tr YTD, representing a 20.93% rise over the opening level for the year.
Mixed Sector Indices
The sectorial performance indexes were mixed, as the NGX Consumer Goods closed higher by 0.55%, while NGX Banking index led the decliners after losing 0.91%, followed by Industrial goods and Insurance with 0.35% and 0.07% respectively. Just as Energy closed flat.
Market breadth turned negative, as losers outnumbered gainers in the ratio of 16:12; just as activities in volume and value terms were down, after players exchanged 200.92m shares worth N1.45bn, with volume driven by trades in Sterling Bank, Fidelity Bank, UBA, GTCO and Zenith Bank.
Cham and Flour Mills were the best-performing stocks, after gaining 7.69% and 4.46% respectively, closing at N0.28 and N29.30 per share respectively on market forces and earnings expectation. On the flip side, ABC Transport and Japaul Gold lost 9.68% and 9.09% respectively, closing at N0.28 and N0.30 per share, purely on selloffs.
Market Outlook
We expect a mixed trend on price adjustment of Zenith Bank and Stanbic IBTC for interim dividend and portfolio rebalancing on bargain hunting as players interpret macroeconomic data and impressive half-year results in expectation of more bank’s scorecards, especially from UBA and Accesscorp in the midst of sovereign risks, as all eyes are on interim dividends.
We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists. Analysts are also focused on the lookout for August CPI and flow of funds amid oil prices oscillation.
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CRO|Investdata Consulting Ltd
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