Market Update for July 14
Equities trading on the Nigerian Exchange was mixed at the midweek, resisting further decline on a low traded volume and positive breadth that confirms the expected reversal in the midst of corporate earnings and economic data expectations.
Indeed, all eyes are on these company numbers and data that would further show the state of the nation’s economy, following which market players should not forget the outcome of last month’s G7 leaders’ meeting, where the most powerful and developed economies are all in on climate and equality movement. They agreed to continue supporting their economies by focusing on future growth, rather than the lingering crisis- from global healthcare crisis to transformation.
That is why economic recovery, growth, and prices are increasing, with the target of building back better, not minding inflation, as they intentionally inflate by devaluing money and piling debts. In all of these, the global powers are not devaluing their currencies relative to each other, while there is the devaluation of currencies relative to prices of goods and services.
Consequently, higher than expected numbers and the June inflation figure in a weak recovering economy will determine the direction of equity prices ahead of the Central Bank of Nigeria Monetary Policy Committee meeting slated for July 24 and 25, 2021. The improved buying sentiments as NGX index action is slightly lookup, while money flow index slipped down on a low traded volume are giving a mixed signal that needs to be confirmed at Thursday’s trading session, knowing that the power of volume in confirming a trend change or breakout is very important. Also, the fact that volume is drying up at this point of seeming reversal supports an uptrend after forming a hammer candlestick.
We know that corporate and analysts’ forecasts are made to be beaten. In fact, many analysts have typically increased estimates for Q2 numbers, even as companies are forecasting higher earnings in Q3, even as higher-than-expected earnings will make stocks cheaper. At the moment, the market’s Price-to-Earnings ratio, just like those of many companies, is trading below 18 times their earnings. In an environment of relatively low-interest rates and high inflation, stocks historically, tend to move higher on earnings performance.
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Meanwhile, midweek’s trading opened on the downside before oscillating up on buying interests among high and medium cap stocks that pushed the composite NGX All-Share index to an intraday high of 37,872.55 basis points from its lows of 37,805.95bps, and thereafter closed slightly above its opening point at 37,872.55bps.
Market technicals were positive and mixed, with volume traded higher than the previous day’s, in the midst of breadth favoring the bulls on high buying pressure as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ volume. The total transaction volume index stood at 0.90 points, just as momentum behind the day’s performance was relatively weak, as seen in the 47.61pts Money Flow Index, compared to the previous day’s 53.40pts, indicating that funds left the market, despite closing flat.
Index and Market Caps
At the end of Wednesday’s trading, the benchmark index NGXASI inched up slightly by 15.31 basis points, closing at 37,872.55bps, from an opening level of 38,857.24bps, representing a 0.04% up, just as market capitalization rose by N7.98bn, closing at N19.73tr, from its opening value of N19.72tr, representing a 0.04% value gain.
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Wednesday’s upturn was due to buying interests in stocks like MTNN, Total Nigeria, UACN, Fidelity Bank, Capital Hotel, NCR, FBNH, UCAP, PZ Cussons and UPDC, among others. This impacted mildly on Year-To-Date loss, reducing it to 5.96%, while the drop in market capitalization YTD slide to N1.32tr, representing a 6.29% drop from its opening value for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as the NGX Banking and Insurance fell by 0.91% and 0.28% respectively, while the NGX Energy index led the advancers, after gaining 0.58%, followed by Consumer goods with 0.02% higher, while NGX Industrial goods closed flat.
Market breadth remained positive with gainers outnumbering losers in the ratio of 18:11, while transactions in volume and value terms were up as investors traded 197.23m shares worth N2.14bn, with volume driven by trades in UBA, Access Bank, Zenith Bank, UPDC, and GTCO.
Capital Hotel and NCR were the best-performing stocks, gaining 10% and 9.89%, closing at N2.64 and N3.00 per share respectively on market forces and sentiments. On the flipside, Linkage Assurance and cornerstone Insurance lost 5.41% and 5.36% respectively, closing at N0.70 and N0.53per share, on profit-taking.
Market Outlook
We are expecting a sustained trend depending on market forces today, as profit-taking slows down and rekindled buying interests continued ahead of more Q2 numbers any moment from now, amid the declining volume and divergence that supports an uptrend while smart money takes advantage of pullbacks to reposition ahead of earnings and economic data expectations. It is noteworthy that oil price continues its recovery at the international market, even as corporate actions and interim dividend possibilities around the corner.
We note also that some stocks are trading within their buy ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $73pb to support global economic and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support the global and domestic economic recovery that will enhance the market and give direction.
The banking sector and others remain attractive on the back of the prevailing low prices, despite the Q1 mixed numbers.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected Q2 earnings reports, until the next MPC meeting in the coming week.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
