Expect Mixed Trend, Sentiments, As Bargain Hunters React To Impressive H1 Financials

Market Update for August 3

The nation’s equity market maintained its positive sentiment at the midweek in the midst of increasing volatility and buying interests on the strength of half-year earnings performance as the benchmark NGX All-Share index closed slightly lower. It halted the previous day’s gain, on a low traded volume and positive market breadth, sustaining the uptrend momentum as players continue to interpret corporate earnings vis-à-vis the recently released macroeconomic data.

Investors are taking advantage of the increasing global volatility, rising geopolitical tension and slowing consumer spending, however, there are pockets of strength in some sectors amidst the better-than-expected earnings releases that offer insights into the inherent upside potentials associated with the industries and companies in the various sectors. There is the possibility of sectors beating the next quarterly estimates and predictions, attaining their pre-pandemic performances as they deal with capacity in the midst of soaring costs and insecurity.

The earnings performance of companies in the NGX-30 has supported the market rally before now has remained positive, despite the share prices witnessing pullbacks or ranging to provide buy opportunity. This offers investors and traders an insight into the general mood, just as Price/Earnings ratios of most companies on the exchange revealed their underpriced state, with higher upside potential to attract liquidity and positive sentiment.

The new uptrend remains intact despite midweek’s slowdown, while investors need to navigate the market now that many equity prices look cheap on the strength of impressive earnings and relatively low prices. The market cycle of a bear situation and market bottom in the face of technical patterns of oversold market or individual stocks supports the uptrend, as bargain hunters take advantage of the pullbacks or relatively low PE ratio to reposition their portfolios.

Despite the market pullback, the NGX All-Share index still trades above 50,000 mark and slightly below the ‘T line’ and 50-day moving average, to attract bargain hunters as sector rotation and portfolio rebalancing increased amidst the scorecards of many companies in the market. 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 this 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 rebounded after pulling back to their six-month low on output concerns and fear of recession to trade at $97 per barrel in the international market, following the low factory activities in China, Japan and others that now signal demand fear, made worse by the weakened GDP in the US that may push the world’s largest economy into a technical recession. Already, central banks across the globe have continued to hike rates in the fight against rising inflation, in the midst of a sluggish economic growth data from China and others. All these have continued to influence the monetary policy options of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid the looming economic recession.

Meanwhile, Wednesday’s trading opened slightly in the green and osculated throughout the trading session on the buying interest and profit taking in blue-chip stocks, a situation that pushed the NGX’s index to an intraday low of 50,242.94bps from its highs of 50,647.19ps before closing marginally below its opening point at 50,594.97 bps.

Market technicals were positive and mixed, with lower volume traded than the previous day in the midst of breadth favoring bulls on buying sentiment as revealed by Investdata’s Sentiments Report showing 87% buy position and 13% sell volume. The total transaction volume index stood at 0.64 points, just as energy behind the day’s performance was weak as Money Flow Index is looking up at 32.81pts, from the previous day’s 27.94pts, indicating that funds entered the market, despite the pullback.

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Index and Market Caps

At the end of midweek trading, the composite index NGXASI slide by 31.07bps, closing at 50,594.97bps, after opening at 50,626.04bps, representing a 0.06% drop, just as market capitalization fell  by N16.76bn, closing at N27.28tr, from the previous day’s N27.30tr, which also represented a 0.06%  value loss.

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The day’s downturn was driven by profit-taking and selloffs in MTNN, BUA Cement, UBA, NGXGroup, Learn Africa, NAHCO, Cutix, Fidelity Bank, and Nigerian Breweries, among others, which impacted mildly on Year-To-Date gain, which reduced to 18.44%. Market capitalization gain YTD also fell to N3.83tr YTD, representing a 22.37% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors for the session were mixed, as NGX Consumer goods and Energy closed higher by 0.39% and 0.28% respectively, while NGX Industrial Goods led the decliners after losing 0.45%, followed by Banking and Insurance with 0.32% and 0,09% respectively.

Market breadth, remained positive as gainers outnumbered losers in the ratio of 21:15; just as activities in volume and value terms were mixed, after investors exchanged 121.16m shares worth N4.17bn, with volume driven by trades in MTNN, FBNH, Zenith Bank, UBA and Accesscorp.

LASACO and UPDC were the best-performing stocks, as they gained 10% and 9.71%, closing at N0.99 and N1.13 per share respectively on market forces. On the flip side, Learn Africa and University Press lost 10% and 9.79% respectively, closing at N2.34 and N2.12per share, purely on profit taking.


Market Outlook

Expect a mixed trend and sentiments to continue on bargain hunting as players react to impressive half-year financials of companies in the midst of sovereign risks, as interim dividends are expected from first-tier banking stocks. 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

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