Indecision Still On NGX, As Investors Await More Interim Div Banks’ Results

Market Update September 6

Seesaw movements again resurfaced on the Nigerian Exchange Monday when the week’s trading started with a low traded volume, but positive market breadth, with selling sentiment especially in the Consumer Goods and Healthcare sectors dominated the session, dragging the general market down with them.

The selloffs or profit-taking witnessed during the trading session were due to continued portfolio repositioning and reactions to the disappointing half-year earnings report from Stanbic IBTC Holdings. This was despite the fact that the group grew its interim dividend payout by 150% from 40 kobo in the 2020 half-year to N1.00 per share. The performance and profitability ratio came well below market expectations. 

Despite the slight pullback on Monday, trading momentum improved marginally as technical indicators remain positive, especially RSI and the money flow index that retraced up. Also, we note the sideways movement of the NGX index action which awaits a trigger in the form of positive news or government policy. This is because the strength behind the current market trend is still low as revealed by the ADX reading 15.72 which is below the 20 point that indicates relative strength, even as the day’s candlestick formation pattern reversal also indicates indecision among market players.

Meanwhile, the session’s trading opened on the upside and oscillated between the midday and afternoon on buying interests in value and growth stocks, while profit booking hit healthcare and consumer goods stocks. This situation pushed the NGX index to an intraday low of 39,237.81 basis points, from its highs of 39,290.84bps, after which it closed below the opening point at 39,252.89bps.

Market technicals were positive and mixed as volume traded was higher than that of the previous day in the midst of breadth favouring the bulls on a selling pressure as revealed by Investdata’s Sentiment Report showing 28% ‘buy’ volume and 72% sell position. Total transaction volume index stood at 0.91 points, just as the momentum behind the day’s performance was relatively strong, with Money Flow Index reading 50.88points, up from the previous day’s 45.71 points, an indication that funds entered the market, despite sliding down.

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Index and Market Caps

At the end of Monday’s trading, the composite NGX All-Share index slipped by 8.12 basis points, closing at 39,252.89bps, from its opening level of 39,261.01bps, representing a 0.02% marginal drop, just as market capitalization fell by N4.28bn, closing at N20.45tr, from the opening value of N20.46tr, also represented 0.02% value loss.

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Monday’s downturn was driven by profit-taking in stocks like Stanbic IBTC, Dangote Sugar, GSK, Flour Mills, May & Baker, University Press, Africa Prudential, Neimeth Pharmaceuticals, and Transcorp, among others. These impacted mildly on Year-To-Date loss, which increased to 2.53%, just as the loss in market capitalization YTD stood at N606.48bn, representing a 2.77% decline from the year’s opening value.

Bullish Sector Indices

Performance indexes across the sectors were green, except for the NGX Consumer Goods that closed 0.41% lower, while the NGX Banking Index led the advancers, gaining 0.48%, followed by Oil/Gas, Insurance, and Industrialgoods with 0.32%, 0.04%, and 0.03% respectively.

Market breadth was positive as gainers outpaced losers in the ratio of 21:15, while activities in volume and value terms were mixed after investors exchanged 210.95m shares worth N1.38bn, compared to the previous day’s 180.3m units valued at N1.72bn. The day’s volume was driven by trades in Access Bank, Mutual Benefits Assurance, Sovereign Trust Insurance, Universal Insurance, and Honeywell Flour Mills.

Linkage Assurance and FTN Cocoa were the best-performing, gaining 8.93% and 8.89%, closing at N0.61 and N0.49per share respectively on low price attraction and market forces. On the flip side, GSK and Consolidated Hallmark Insurance lost 9.56% and 8.62% respectively, closing at N6.15 and N0.53 per share, purely on profit-taking.

Market Outlook

We expect the mixed trend to continue as investors and traders utilizes the pullback to position, as many stocks are trading within their buy ranges, a situation expected to attract funds into the equity space as dividend yields remain high and capable of serving as a hedge against inflation. Also, institutional investors and others continue to digest the Q2 GDP growth ahead of more first-tier banks results, as well as the continued repositioning of portfolios for the year’s 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 day’s low volume suggests that institutional investors and others are still cautiously 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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