Market Roundup for August
Trading on the Nigerian Exchange (NGX) closed positive on the final session of August. The gain was, however, not enough to change the narration for the month, as the benchmark All-Share index closed in red after witnessing a mixed sentiment due to selloffs and profit taking in highly capitalized stocks which expectedly weighed on the index negatively. This extended the bear-run for the second successive month, breaking down the 95,000 psychological line to test the T-line on the monthly time frame.
Also, the adjustment of in the prices of 16 companies for dividend and bonus within the period further pulled the market southward despite the supplementary listing of 16.117 billion shares in favour of International Breweries at N3.65 each that impacted positively on market capitalization.
During the period: PZ and Zenith Bank released audited account for full and half-year respectively, where Zenith Bank announced interim dividend of N1.00 for its shareholders. While Guinea Insurance, Cornerstone, Academy Press, Ellah Lakes, Tantalizer, Union Dicon, Cutix and other presented unaudited quarterly results.
During the week also, Accesscorp, Stanbic IBTC and Fidelity Bank notified the exchange and investing public of delays in publishing their audited half year results, following which they now have September-end as new deadline, while awaiting approval of their primary regulator.
Meanwhile, the month of September, being the concluding part of third quarter, will not only witness mixed trend as a result of new positioning towards the Q3 numbers expectedly, but experience reactions to earnings from the few listed equities yet to release their half-year numbers, especially the interim dividend paying banks. Also the corporate actions in the new month will influence the expected mixed outlook for the period, even when the month is a mixed one for equity market, going by historical data. Also, there is the end-of-the-quarter window dressing that comes with the month, coupled with the outcome MPC meeting and direction of fixed income market rates will all shape the new month to usher in the last quarter of the year 2024 that equally comes with its own seasonality and sentiments.
We note the seemingly encouraging macroeconomic indices released recently in the face of increasing cases of insecurity in the nation, inconsistent policies and global geopolitical tension in midst of matured economies ending their rate hike cycle to boost economic activities. As inflation cooling down is being threaten by ongoing conflict in the Middle East and prolonged war in Ukraine and Russia are stoking the fear of oil supply disruption, thereby affecting demand for crude oil. The happenings in the economy and political space are likely to impact the market and different sectors positively or negatively, judging by the recently released Q2 GDP numbers showing a slow growth of 3.19%. This should also guide investment decisions ahead of quarter and year-end, especially the knowledge of the sectors or industries that supported this marginal GDP growth. As sector rotation continued in the new month and rest of the year.
Also noteworthy is the nation’s inflation rate slowing down for the first time in almost 2 years at 33.40%, from its highest rate of 34.19 in June 2024, while the latest Nigeria’s Purchasing Managers’ Index (PMI) fell below to 50 points in July to read 49.20 from 51.90points in June, added to the back-to-back interest rate hike by the CBN, in the face galloping high cost of production and living. Selloffs and buying interest also remained mixed during the period. The volatile mode and high yield in fixed income market continue to affect the market, due to FX and exchange market challenges in the nation today.
We expect that effective coordination among the policy makers will reduce policy mismatch, summersaults and promote realistic economic reforms, structural adjustments, effective disbursement of capital project funds and real change in the implementation style of the government necessary to further support the seeming economic recovery by enhancing productivity and national output needed to support growth in a new path of progress.
The bear-run during the month of August was obvious as sellers dominated trading activities in the period. In the cummulative 22 trading sessions of the month, the market closed red in 12 days, recording an up market in the remaining 10 to extend the previous month’s negative outlook. It also slowed down year-to-date gain, after the NGX’s All-Share Index lost 1.23%, owing to selloffs in highly priced stocks, price adjustment for dividend and profit taking. Even in a less than average traded volume and mixed sentiment as some investors take position and rebalance their portfolio. Despite the mixed numbers, many stocks remain attractive, offering high margins of safety and upside potentials.
Meanwhile, during the month under review, the NGX All-Share index shed 1,211.21 basis points, closing at 96,579.54 basis points, after touching a low of 94,563.21bps and highs of 99,015.62bps, from the 97,774.22bps it opened for the month, representing a 1.22% drop. This came with selloffs in Dangote Cement, BUA Cement and MTNN that outweigh the buying interests in Oando, Total, Okomu Oil, Presco and other blue chip companies during the month.
The sell volume of total transactions for the month was 55%, while buying position was 45%, while volume index for the period was 1.23. Market capitalisation for the month slide by N36 billion, closing at N55.48 trillion, from an opening value of N55.51 trillion, representing a 0.06% value loss. This is different from the index due to additional shares listed during the period.
The market sustained selloffs in the face of mixed sentiments and trends for stocks, especially with the stronger earnings, positive news, oscillating oil prices, expectation of interim dividend and investors going with value and defensive stocks that have strong yields to hedge against high inflation in the midst of a stronger US$ and depreciation of the Naira against other currencies.
Traded volume for the month fell by 17.87% to 10.62bn shares, from 12.93bn units in the month July, even as market breadth for the period was positive with advancers outnumbering decliners in the ratio of 70:28. This reflected on sectorial indices that closed mixed in the period under review.
Sectoral performance indexes for the period were mixed, as shown in the chart below; the NGX Oil/Gas led the advancers, after gaining 22.39%. This was followed by the Insurance, Banking, Consumer goods, Pension index and Growth index with 11.46% 6.96%, 4.30%, 4.12% and 3.39% respectively, as investors took more position in energy stocks and others, while Industrial goods index top the decliners with 13.06%, followed by Premium index and NGX 30 by 5.16% and 0.67% respectively.
The best performing stocks during the period were a combination of low, medium cap companies and high priced stocks, led RT Briscoe which gaining 343.75% as investors and traders reacted positive to its return to profit, and market sentiment. It was followed by Oando’s 213.24% notch on the news of its acquisition of the assets of Nigeria Agip Oil Company (NAOC), resulting an expansion in its capacity. Others were Industrial Medical Gases whose share price appreciated by 103.08%; Deap Capital, 79.59%; Total Energies, 73.28%; and Daar Commiucations, 65.91%, among others.
Source; Investdata Research
The worst performing stocks on the other hand were United Capital in the aftermath of a markdown of its shares for bonus and dividend. Cutix was adjusted for bonus and dividend on the exchange in the midst impressive Q1 numbers, others that topped the losers’ chart were BUA Cement, Thomas Watt, CWG, Fidson, SCOA, Transpower, MTNN and Dangote Cement.
Source: Investdata Research
Technical Analysis of August market
NGXASI MONTHLY TIME FRAME (See opening Chart)
The NGX index’s action had mixed trend and sentiment to form a hammer candlestick pattern on a monthly time frame that supports reversal in the new month depending on market forces and fundamental factors like the expected financials from the banks and others, with money flow index looking down to read 69.40 which indicates funds left the market on selloffs and profit taking. Market players should trade with caution to avoid a bear trap. Since NGX composite index has formed descending triangle chart pattern on the multiple time frame of weekly and monthly supports continuation of current trend or reversal depending on market sentiment and news, now that more interim dividend results are expected and others economic data. As oil price continued to oscillate around $78 to $82 in the international market.
Investors and traders should stay very cautious with their investments as we move towards the end of 2024 and beyond, by having good entry and exit strategies at all time.
Market Outlook
We expect the mixed trend to continue until interim dividend paying banks like GTCO, UBA, Stanbic IBTC, Fidelity Bank and Accesscorp start presenting their results just as Zenith Bank released its numbers on Saturday, offering N1.00 interim dividends. This has given investors an insight into what should be expected at the end of the year.
The mixed intraday movement is likely to persist as the month of September progresses in the midst of profit booking and investors repositioning their portfolios ahead of Q3 numbers. This is also against the backdrop of the fact that the capital wave in the financial market may resurface in the midst of high-interest rate, slowing yields in the fixed income market, slowdown in inflation and slow economic recovery and outlook for 2024 as government is going front and back with mismatch polices and action here and there coupled with the rising insecurity and high cost of doing business in the nation
Also, investors and traders are positioning amid the changing sentiments in the hope of improved liquidity as a result of mixed economic indices to continue and support the reversal of the current correction.
We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their dividend on the strength of their earnings capacity.
Again, the current undervalued 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.
However, reversal in trend is underway, depending on market forces, going forward, as propelled by expected Q3 earnings reports, until the next MPC meeting this new month. At the current market level, players should trade with caution and follow their trade plans, by effectively timing the market for trend selection that comes with changes in market phases.
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