Expect Mixed Trend On Portfolio Rebalancing, Buying Interests In Banking Stocks

Thursday’s trading session on the Nigerian Exchange, the first for the month of September, the final month of the Q3 and maintained a positive outlook, closed higher, extending its bull transition for the second consecutive day on improved gaining momentum and very high traded volume that was driven by buying positions in BUA Cement, Accesscorp, Flour Mills and UPDC.

The mixed sentiment and demand for blue chip stocks helped the benchmark index to close higher, regardless of the fact that interim dividend paying banks had informed investors of delay in the release of their half-year earnings before the Central Bank of Nigeria (CBN).

That notwithstanding, Fidelity Bank’s entry into the interim dividend ring with its 10 kobo per share offer, amidst its impressive half-year numbers, and the fact that the bank is expanding its operations with the planned 100% acquisition of Union Bank UK Plc is noteworthy for the market at a time like this. The offer of interim dividend by Fidelity Bank, after a previous attempt that was truncated by the CBN some years ago, is indicative of what to expect from its peers, both at half and full-year. We note also that the recent decision by the CBN to hike interest rate on savings accounts to 30% of MPR, after a back-to-back hike in MPR is expected to boost the performance of banks, while raising cost of funds, in spite of which net interest income of banks is expected to improve.

Given the prevailing market mood across the globe and what is happening in the local economy today, in the face of uncertainties and volatility by traders and investors, it doesn’t have to be a scary time if you have the tools and knowledge to effectively combat the oscillation so that you can gain the confidence that you need to trade and invest in today’s fluctuating market.

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 top reversal pattern in the midst of buying sentiment after making lower highs on high traded volume that signal possibility of pullbacks depending on market forces in the new month. These reveal 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 end of Thursday’s trading 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.

To navigate the new month profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil prices seemingly rebounded to trade at $94.57 per barrel in the international market, following some strong economic data in the midst of recession fear door to aggressive interest rate action by central banks droving bearish sentiment. As impact of the Russia-Ukraine conflict on the global economy to avoid the looming economic recession. Despite the bailout package of china’s government to simulate economic activates and stable employment.

Meanwhile, Thursday’s trading opened slightly on the upside, but was sustained, despite oscillating in the afternoon on selloffs and position taking in blue-chips, a situation that pushed the NGX’s index to an intraday high of 49,934.20bps from its lows of 49,836.51ps, before closing slightly above its opening point at 49,889.88bps.

Market technicals were positive and mixed, with lower volume of shares traded than the previous day in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 55% buy volume and 45% sell position. The total transaction volume index stood at 1.24points, just as momentum behind the day’s performance was relatively strong as Money Flow Index is looking up at 50.29pts, from the previous day’s 41.07pts, indicating that funds left the market.

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 Index and Market Caps

At the end of Thursday trading, the NGX All Share index gained 53.37bps, closing at 49,889.88bps, after opening at 49,836.51bps, representing a 0.11% up, just as market capitalization rose by N28.75bn, closing at N26.91tr, from the previous day’s N26.88tr, which also represented a 0.11% value gain.

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Thursday’s upturn was driven by buying interests in BUA Cement, Flourmill, Accesscorp, FCMB, UPDC, CHI PLC, Fidelity Bank, Oando and UBA, among others, which impacted mildly on Year-To-Date gain, which increased to 16.79%. Market capitalization gain YTD also rose to N3.40tr YTD, representing a 20.40% rise over the opening level for the year.

 Mixed Sector Indices

The sectorial performance indexes were mixed, as the NGX Insurance and Banking closed lower by 0.54% and 0.43% respectively, while NGX Industrial goods index led the advancers after gaining 0.99%, followed by Energy and Consumer goods with 0.32% and 0.09% respectively.

Market breadth maintained positive position, as gainers outnumbered losers in the ratio of 14:12; just as transactions in volume and value terms were mixed, after investors exchanged 229.12m shares worth N1.75bn, with volume driven by trades in Sterling Bank, GTCO, Fidelity Bank, Mutual Benefits Assurance and Zenith Bank.

Pharma-Deko and Consolidated Hallmark Insurance were the best-performing stocks, after gaining 7.43% and 5% respectively, closing at N1.88 and N0.63per share respectively on market forces. On the flip side, Mutual Benefits Assurance and CWG lost 9.38% and 9.09% respectively, closing at N0.29 and N0.90 per share, purely on profit taking.

Market Outlook

Being the last trading of the week, we expect a mixed trend on increased buying interest in banking stocks  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 GTCO, 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 Q2 GDP and flow of funds amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements.

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Ambrose Omordion

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08179547605