Market Update for the Week Ended Sept 10 and Outlook for September 13-17
The week under review was bearish on negative sentiments and selloffs across all classes of stocks, especially the high cap companies dragging the composite NGX All-Share index down. The selloffs were heightened when half-year audited results that came from the remaining first-tier banks came mixed in performance, as numbers from Guaranty Trust Holding Company and Stanbic IBTC were below market expectations and analysts projection, just as that of FBN Holdings, despite the interim dividends they declared. Score-cards from Access Bank, UBA, and Fidelity Bank were, however, impressive with growth in dividend payout, while Zenith Bank’s report was flat, but the directors maintained the interim dividend of 30 kobo.
The pullbacks in the first full trading week of September is expected, as it creates ‘buy’ opportunities in a volatile and correcting market ahead of the August Inflation report, end of the quarter window dressing, Q3 earnings reporting season, and the Monetary Policy Committee (MPC) meeting later in the week. Meanwhile, the market’s Price to Earnings Ratio remains below 12x, revealing the undervalue state of many equities on the exchange, added to the high earnings and dividend yields to guide position-taking ahead of 2021 full-year numbers as the final quarter draws closer.
The month of September in recent years has been kind to investors, given what has come to be known as the September Effect. The market has been mixed, but positive in recent years as revealed by Investdata’s 10-year historical data. This has added a level of confidence despite the pullbacks and uncertainty in the economy.
This also is likely to influence September depending on news, events, government policy, and market conditions in the month. In the new week, we expect mixed trends as investors continue to digest the results of the remaining first-tier banks that were released during the week.
In recent years’ historical data shows that September is a position-taking period that will last throughout the ember months to year-end, due to seasonality associated with the year-end. This is time to target stocks in sectors that drove the GDP growth as revealed by the report of the National Bureau of Statistics (NBS), while not leaving out value and growth stocks with high upside potentials. Also noteworthy is the fact that oil prices rebounded in the international market to trade above $70 and support the nation’s external reserves and foreign exchange market at a time the Naira continues to devalue in the black market.
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Movement Of NGXASI
It was a bearish week with five sessions of down markets, as the NGX index action opened the period on a negative note, extending the previous week’s negative outing on a very high traded volume and negative breadth, closing below the 39,000 psychological line.
The week’s trading started on a negative note that was sustained through the period before giving up 0.71% on Friday, resulting in a deeper cumulative 0.86% loss for the week, compared to the previous week’s negative position of 0.57%.
Consequently, the benchmark index lost 339.28basis points, closing at 38,921.78bps from its opening level of 39,261.01bps, after touching an intra-week low of 38,887.11bps from its highs of 39,290.84bps on selling sentiments in high, medium, and low cap stocks. Also, market capitalization fell by N177.04bn, closing at N20.28tr, compared to the previous week’s N20.46tr, which also represented a 0.86% depreciation in value.
During the week under review, medium and low-priced stocks dominated the advancers’ table for the week, as players positioned in Oando, FTNCocoa, United Capital, Vitafoam, Julius Berger, International Breweries, Regency Insurance, Mutual Benefits, ABC Transport, and Honeywell among others. This was due to the continued repositioning of portfolios as the market correct and changed the trading environment after price actions revealed the presence of sellers in the market, a situation that reflected on the sectorial indexes
Market breadth for the period was negative on high traded volume, with the market recording the highest decline on Friday to signal the wait-and-see attitude among traders, with the losers’ outnumbering gainers in the ratio of 34:25. The selling pressure was also revealed by the investors’ sentiment report showing just 9% of buy volume and 91% of sell position. Money Flow Index dropped slightly to 63.36bps from the previous week’s 71.87 points, an indication that funds left the market.
NSEASI WEEKLY CHART MOVEMENT
The NGX index’s action, revealed a change in trend within a consolidating rectangle as it pulls back after forming a double top chart pattern on a weekly time frame, with the candlestick formation indicating weakness and selloffs among traders. However, we need to watch out for a reversal in the new week as traders review and digest the financials of interim dividend-paying stocks and the expected economic data that should further support market fundamentals to attract liquidity.
Mixed Sectoral Indices
Performance indexes across the sectors were mixed during the week, except for the NGX Industrial Goods that closed flat, while the NGX Oil/Gas and Consumer Goods closed 2.28% and 0.18% higher respectively, while the NGX Insurance and Banking indexes closed 3.39% and 0.96% lower respectively. Activities in volume and value terms were up, with investors exchanging 1.43bn shares worth N13.07bn, compared to the previous week’s 1.34bn units valued at N8.65bn. The week’s volume was driven by Financial Services, Conglomerates, and Consumer Goods, particularly Access Bank, FBNH, UBA, Zenith Bank, and GTCO.
Oando and FTNCocoa were the best-performing stocks for the week, after gaining 14% and 11.11% respectively, and closing at N4.64 and N0.50 per share respectively on market sentiments and forces. On the flip side, Cornerstone Insurance and UPDC lost 15.79% and 10.86% respectively, at N0.48 and N1.61 per share, on profit-taking and selloffs.
Outlook for the week
We expect a mixed trend as investors and traders digest the results of first-tier banks and happenings in the money market as TB rates inch up, just as many stocks enter their buy range to attract funds into the equity space. Also, institutional and other investors look forward to the August inflation report and the MPC meeting slated for September 16 and 17, 2021, as well as the continued repositioning of portfolios for the last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform. The week’s high volume suggests that institutional investors and others are still in the market looking at the numbers. It is noteworthy that oil prices rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.
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