Market Update for August 20
The nation’s equity market extended its bull transition on a mixed and volatile session at the end of Thursday’s trading with sustained buying interests in manufacturing and banking stocks thereby pushing the benchmark All-Share index higher.
Traded volume was low, despite the positive sentiments in the midst of prevailing sociopolitical and economic uncertainties, especially the rising insecurity, mismatch in economic policies and reforms that continues to threaten recovery and confidence in the system. These, in turn, continue to shut out foreign and local investors despite the huge opportunities in the stock market, as a result of a three-year-decline. However, there is ongoing revaluation as a result of the outpouring of better-than-expected half-year earnings reports from quoted companies which have been impacted by the Coronavirus (COVID-19) pandemic.
It is the peak period of the half-year reporting season, and as reiterated in our previous updates, earnings released will lead market fundamentals through this month. Investors’ focus at the moment should, therefore, be on banking stocks with half year dividend policy, and a few other listed whose prices have not been adjusted for already announced cash/scrip dividends. This is not forgetting few listed equities yet to unveil their full-year numbers.
Thursday’s trading opened in the green and oscillated throughout the session in the midst of buying pressure and profit taking among medium and high cap stocks. This pushed the NSE index to an intraday high of 25,204.60 basis points, from its low of 25,132.67bps, before closing the session higher at 25,204.60bps on a positive breadth.
Market technicals for the session were positive and mixed, as volume traded closed lower than mid-week’s session in the midst of breadth that favoured the bulls on strong buying sentiments as revealed by Investdata’s Sentiment Report showing 100% ‘buy’. Total transaction volume index stood at 0.85points, just as the energy behind the day’s performance remained strong, with Money Flow Index reading 73.42points, from the previous day’s 72.55points. This is an indication that funds entered some stocks.
Index and Market Caps
At the end of Thursday’s trading, the composite index NSEASI gained 33.28bps, closing at 25,204.60bps, from its opening figure of 25,171.37bps, representing a 0.13% rise, just as market capitalization climbed by N18.06 billion at N13.15tr from opening value of N13.13tr, which also represented 0.14%. This resulted from the day’s listing of additional 2.03bn ordinary shares of Consolidated Hallmark Insurance arising from its just concluded right issue.
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The market upturn was driven by price appreciations in stocks like Guaranty Trust Bank, Stanbic IBTC, CAP, Access Bank, Fidelity Bank, International Brewery, GSK, and Fidson Healthcare. This, in turn, impacted the NSE’s Year-To-Date loss which reduced mildly to 6.10%. Market capitalization YTD gain climbed to N190.52bn, or 1.47% above the year’s opening value.
Mixed Sector Indices
Performance indexes across the various sectors were largely bullish, except for the NSE Insurance that closed 0.23% lower, while the NSE Consumer goods index led the advancers table after gaining 0.52%. It was followed by the NSE Banking and Industrial Goods with 0.18% and 0.03% higher respectively, as NSE Oil/Gas closed flat.
Market breadth was positive as advancers outnumbered decliners in the ratio of 17:11, while transactions in terms of volume and value were mixed with traded volume dropping by a marginal 0.26% to 179.55m shares, from the previous day’s 180.01m units. Transaction value rose by 64.42% to N2.53bn, from midweek’s N1.54bn, with volume boosted by trades in Transcorp, Guaranty Trust Bank, Lasaco, FBNH and Zenith Bank.
The day’s best performing stocks were International Brewery and Cutix which garnered 10% and 9.71% respectively, closing at N3.30 and N1.92 per share on low price attraction and market forces. On the flip side, Studio Press and UACN Property lost 9.60% and 9.47% respectively, closing at N1.79and N0.86 respectively on profit taking and selloffs.
We expect a mixed performance on profit taking and buying interests ahead of the interim dividends from Stanbic IBTC, GTB, Zenith Bank, Access Bank and UBA that have kept the market above the 20-day moving average on a daily time frame. The mixed intraday movement is likely to persist in the midst of profit booking, as investors reposition their portfolios ahead of Q3 numbers. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation and unstable economic outlook for 2020 as government and its economic managers are going front and back with mismatch polices.
Also, investors and traders are positioning in anticipation of interim dividend paying companies earnings reports, amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend.
We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.
Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.
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