Market Update for the Week Ended September 2 and Outlook for September 5-9
Nigeria’s stock market sustained its positive outing last week to usher in the month of September. The benchmark NGX All-Share index action made lower highs to breakout the resistance level of 50,000 psychological line after testing 50,056.30 on an above average traded volume, positive sentiments and breadth. The high volume as the market extended its positive momentum indicates strength in the midst of positive half-year earnings news released so far by dividend paying banks.
This is just as macroeconomic and corporate numbers released recently give market players insights into what is happening in the economy and, indeed, the banking sector. We note that the August Purchasing Managers’ Index slowed down to 52.3 points, from 53.2 points in July, and the impressive earnings reports from Zenith Bank, Stanbic IBTC and Fidelity Bank that supported market momentum and the share prices of these banks in the midst pf low liquidity.
However, uptrend in prices of blue-chip companies and some high-priced stocks at the end of the week’s trading signal strength that supports recovery and higher upside potentials for value and growth stocks with strong fundamentals and positive technicals on this new motive wave. At this point, traders should adopt new strategies or experiments and not be upset with the market’s mood, while tracking the new strategy to measure how well they are faring, because the factors against the market are many now. You can equally take a break to watch the market, because things are changing, with some of them beyond your control.
Meanwhile, market volatility continues to support technical traders in the midst of prevailing buying sentiments, which was as a result of bargain hunters taking advantage of the relatively low prices of stocks and higher earnings yields that signal a possibility of higher payouts at the end of the year. This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as seen in the high dividend yields pointing to the possibility of stocks as hedge against the soaring inflation.
The NGX index’s action on a daily time frame has broken out the ‘T’ line to confirm a buy signal, while on a weekly chart it is still trading below the ‘T line’ and above the 50-day moving average, trying to rebound on renewed buying interests across the sectors. Portfolio rebalancing has increased in the midst of interim dividend expectations. 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 is on uptrend movement on the strength of funds entering the equity space.
To navigate this current market situation 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 again had pullback to trade at $93.02 per barrel in the international market, following fear of rescission and extension of Covid 19 lockdown in some province in china, despite the stimulus package to boost economy activities in the midst of expected output cut by OPEC in their next week meeting. These are happening amidst 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.
Movement Of NGXASI
Trading on the NGX in the past week was mixed and bullish with two sessions of down markets and three days of up market, amid buying interests in blue-chips, and banking stocks on the expected interim dividends have continued to drive the oscillation and retracement that create opportunities for players to reposition their portfolios, amid interpretation and analyses of macroeconomic data and earnings released recently.
The week’s trading started on a negative note, halting the previous session’s gain, by 0.01%. This trend was sustained on Tuesday when the NGX index lost 0.07%, before rebounding at the midweek by 0.43%. This was extended to Thursday and Friday as the market gained 0.11% and 0.27% respectively, on price appreciation of blue chip stocks. These brought the week’s total gain to 0.73%, compared to the previous week’s 0.63% gain.
Consequently, the key performance NGX All-Share Index rose by 363.68 basis points, closing at 50,045.83bps, compared to the week’s 49,682.15bps opening level, after touching an intra-week high of 50,056.30bps and a low of 49,624.30bps. Market capitalisation also chalked N197bn during the period, closing at N26.99tr, from the previous week’s N26.80tr, which also represented a 0.73% value gain.
During the period under review, Low and medium cap stocks dominated the advancers table that attracted buying sentiments amid volatility and position taking in value stocks and others. Also notable is the fact that investors are taking advantage of the Drrelatively low price to position.
Market breadth for the week turned positive as gainers outnumbered losers in the ratio of 43:27 on buying sentiments as revealed by investdata sentiment report showing 98% ‘buy’ volume and 2% sell position. Money Flow Index was looking down at 27.69bps from the previous week’s 31.29 points, an indication that funds left the market on a weekly chart to reflect the high yield in fixed income instrument and others, just as daily time frame money flow index was up, revealing that funds enter the market on day chart.
The NGX index action on a weekly chart extended its rebound on above average traded volume to signal buy opportunity, as rally continued on a daily time frame to trade above the T line on a buying sentiment and positive momentum, as the market remains strong in the midst of increased volatility and low liquidity. We note also that the index is trading slightly below the ‘T’ line and 20-day moving average on a weekly time frame to signal possibility of breakout, depending on liquidity and reaction to earnings report.
Bullish Sectoral Indices
Sectorial performance indexes for the week were in green, as NGX Consumer goods led the package after gaining 2.01%, followed by Industrial goods, Banking, Energy and Insurance with 1.36%, 1.21%, 0.65% and 0.05% respectively.
Activities in volume and value were mixed, after stockbrokers traded 1.20b shares worth N12.92bn, compared to the previous week’s 914.43m units valued at N15.26bn, with volume driven by Financial Services, Services, ICT and Consumer goods sectors. Specifically, the week’s volume was driven by trades in Sterling Bank, Fidelity, Accesscorp, Etranzact and Dangote Sugar.
Vitafoam and Etranzact were the best-performing stocks for the week after gaining 16.26% and 16.23% respectively, and closing at N23.60 and N2.65 per share on low price attraction and market forces. On the flip side, Unilever and McNichols lost 9.63% and 9.46% respectively, at N12.20 and N0.67 per share, purely on profit taking and selloffs.
Outlook for the week
We expect a mixed trend on price adjustment in banking stocks like Zenith Bank and Stanbic IBTC in the face of profit taking and low liquidity, as market players digest macroeconomic data and half-year corporate earnings released recently. Also, as investors are repositioning their portfolio on the strength of earnings reports. Just as players continue react to the earnings power and revalue of quoted companies on their earnings performance. We note that income investors have sustained buying into interim dividend-paying stocks.
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