Expect Mixed Session On Profit-Taking, Interim Divs, Inflation Report

Market Update for August 13

Price recovery on the nation’s stock market continued onThursday despite the seeming volatility, mixed session and dicey economic situation as the key performance indicator extended its bull transition on high a traded volume and negative breadth.

The positive sentiment driven by the ongoing half-year earnings season has continued to influence prices of low, medium and high cap stocks as market players realigned their portfolios ahead of macroeconomic data and corporate earnings of first-tier banks. In addition, there was also the influence of more March year-end financials, even as companies that had become seemingly become hopeless to their shareholders suddenly posted positive numbers and declared dividends. Specifically, the directors of Northern Nigerian Flourmills and Tripple Gee offered dividends of 15 kobo and 5kobo respectively after posting negative numbers for ovr than five years.

Market players continued position taking in MTNN and Flour Mills, ahead of their August 14, 2020, dividend qualification date, helped by their impressive 2.93% and 7.07% yields respectively in less than 14 days, when compared to other investment windows.

The bull market on Thursday, impacted positively on major market sub-indices except the Industrial Goods, even as we advie traders to play the market cautiously at this point, with the NSE index trading within the double top chart pattern. This is in expectation of interim dividends which have been factored in already to support a pullback when the banks finally present their audited earnings to the market.

Thursday’s trading opened on the upside and oscillated throughout the session on positioning and profit taking among high cap stocks, which pushed the NSE’s index to an intraday high of 25,236.97 basis points, from its low of 24,883.70bps. Thereafter, it closed at 25,236.97bps, higher than the day’s opening figure.

Market technicals were positive and mixed as volume traded was higher than that of the previous session in the midst of negative breadth and high buying pressure as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ volume. The total transaction volume index stood at 1.35 points, just as the energy behind the day’s performance remained strong with Money Flow Index reading 80.24points, from the previous day’s 81.17points, an indication that funds left the market despite closing up.

Index and Market Caps

At the end of Thursday trading, the composite index NSE All Share Index gained 95.49bps; closing at 25,236.97bps from the 25,141.48bps it opened, representing a 0.38% up, just as market capitalization rose by N49.88 billion at N13.17 trillion, from the N13.12 trillionopening value, which also represented 0.38% value gain. .

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The day’s upturn was impacted by gains recorded by stocks like MTNN, NB, Unilever Nigeria, Stanbic IBTC, Flour Mills, Access Bank, AXA Mansard and Wapic, which impacted positively on the NSE’s Year-To-Date loss as it dropped to 5.98%, while market capitalization YTD positive position increased to N206.81bn, representing 1.60% above the year’s opening value.

Bullish Sector Indices

Performance indices across sectors were largely bullish, except for the NSE Industrial Goods that closed marginally lower at 0.12%, while the NSE Insurance index led the advancers with a 2.61% gain, followed by the NSE Consumer Goods, Oil/Gas and Banking with 1.46%, 0.31% and 0.03% up respectively.

Market breadth was negative as decliners outnumbered advancers in the ratio of 18:15, while transactions in volume and value terms were mixed as volume was up by 25.29% while investors exchanged 258.08m shares, up from the previous 204.88m units. Value was however down by 57.18% at N1.68bn, compared to midweek’s N3.38bn. Volume was boosted by trades in Transcorp, Zenith Bank, Chams, Guaranty Trust Bank and FBNH.

AXA Mansard and Consolidated Hallmark Insurance were the best performing stocks during the session, leading the advancers’ table with 9.66% and 8.82% respectively, and closing at N1.59 and N0.37 per share on impressive earnings and low prices. On the flip side, Ikeja Hotel and Academy Press lost 9.9% and 9.09% respectively, closing at N0.91 and N0.30 respectively on profit taking.

Market Outlook

Despite the rebound, we expect a mixed performance on profit taking and buying interest as corporate earnings and economic data are expected in the market, especially from the big banks, as well as inflation report for July. The mixed intraday movement is likely to persist in the midst of profit booking and investors repositioning their portfolios ahead of Q3 numbers and last quarter of the year. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation and unstable economic outlook for 2020 as government and its economic managers are going front and back with mismatch polices.

Also, investors and traders are positioning in anticipation of interim dividend pay companies earnings reports, amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend.

We see investors focusing on portfolio adjustment and rebalancing by  targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.

Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.

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Ambrose Omordionm

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08032055467