Investors Position Cautiously Ahead Of Interim Dividend Earnings Reports

Market Update for August 19

The positive sentiment for financial services stocks on the Nigerian Stock Exchange (NSE) at the midweek strengthened the gaining momentum as market players positioned heavily on interim dividend-paying banking stocks as the half-year earnings reporting season gradually winds down on mixed sentiments and low traded volume. 

Subsequently, the composite All Share index climbed higher for the second consecutive session, trading above the 20-Day Moving Average on a daily chart, while Money Flow Index read 72.55 points, an indication that funds are entering the market despite the sluggish uptrend. 

The seeming resilience on the exchange in recent times resulted from the better-than-expected corporate earnings reports, buying interests in defensive high cap stocks and interim dividend paying equities with yields relatively higher than other investment windows. This is especially as the nation’s rising inflation remains a potent threat to investors’ confidence.

From the historical release dates and data available to investdata Research, interim dividend paying banks are likely to begin presenting their audited half-year scorecards any moment from now, even while market reaction may not be much. This is because many traders have factored in these expected results into their stock pricing, which may lead to profit taking when the reports start hitting the market.

Meanwhile, midweek’s trading session started slightly on the upside, and was sustained throughout; despite oscillating due to profit taking and positioning in financial services stocks, pushing the benchmark index to intraday high of 25,236.98 basis points, from its low of 25,132.67bps. Thereafter, the market closed the day higher at 25, 171.32bps on a flat market breadth.

Market technicals on Wednesday were positive and weak, even as volume traded closed lower than that of previous session in the midst of breadth that was at par, and mixed sentiments as revealed by Investdata’s Sentiment Report showing 63% ‘sell’ volume and buy position of 37%. Total transaction volume index stood at 0.88points, just as momentumbehind the day’s performance remained strong, with Money Flow Index reading 72.55points, from the previous day’s 67.428points. This is an indication that funds entered some stocks and the market.

Index and Market Caps

The key performance NSEASI, at the  end  of the day’s trading gained 34.83bps, closing at 25,171.32bps, from its opening figure of 25,136.49bps, representing a 0.14% up, just as market capitalization  climbed N18.2bn up, at N13.13tr from opening value N13.11tr, which also represented 0.14% appreciation in value.

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Midweek’s session recorded an upturn owing to value appreciation by medium and high cap stocks like Guaranty Trust Bank, Zenith Bank, UBA, Fidelity Bank, and United Capital. This impacted positively on the NSE, as Year-To-Date loss reduced to 6.22%, while market capitalization YTD gain dropped to N160.56bn, or 1.41% above the year’s opening value.

Mixed Sector Indices

The sectorial performanceindexes were largely bullish, except for the NSE Industrial Goods that closed 0.04% lower, while the NSE Banking index led the advancers table after gaining 0.81%, followed by the NSE Insurance and Consumer goods with 0.41% and 0.19% higher respectively, as NSE Oil/Gas was flat. 

Market breadth was at par, as number of advancers were equal to decliners at 13:13, while activities in terms of volume and value dropped by 35.37% and 39.28% with investors trading  180.01m shares worth N1.54bn, from the previous day’s 271m units valued at N2.46bn. This volume was boosted by trades in Zenith Bank, Access Bank, Transcorp, UBA and FBNH.

Studio Press and International Brewery were the best performing stocks, gaining 10% and 7.14% respectively to close at N1.98 and N3.00 per share on full-year earnings expectation and low price attraction. On the flip side, CAP and Royal Exchange Assurance lost 10% and 9.68% respectively, closing at N15.30 and N0.28 respectively on profit taking.

Market Outlook

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 and investors repositioning 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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Ambrose Omordionm

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467