Large Caps Drag NGX 0.63% Down, Despite Expectations From Interim Div Banks
Market Update for August 9
Trading activities on the Nigerian Exchange on Monday was volatile and mixed as the benchmark All-Share index turned red, wiping away gains of the previous session in the midst of earnings expectations from the first tier banks and profit booking from high cap stocks. This is just as sector rotation and portfolio adjustments continued as investors continued interpreting scorecards released so far during the Q2 earnings reporting season.
The trading session’s mixed sentiment failed to lift the market as selloffs kicked off among high cap stocks, irrespective of the impressive earnings performance that had supported the market before now as sectorial rotation continued on back of the released numbers and better future prospects.
It’s obvious that buying pressure subsided during Monday’s trading, and as noted in our previous reports, positive sentiments were strongly Induced by interim dividend expectations, and earnings surprises from some sectors and companies. These are coming amidst the oscillating price of crude oil in the midst of the delta variant of the coronavirus and concerns over the global market breakout or fake-out among others.
Meanwhile, Monday’s trading started slightly on the upside in the morning and oscillated on mixed sentiment of buying interests in energy and consumer goods stocks, amidst profit taking gradually hit building material and high cap stocks. This pushed the NGX index to an intraday low of 38.551.25 basis points from its high of 38,837.34bps, after which it retraced up slightly to close lower at 38,567.261bps on a low traded volume.
Market technicals were negative but mixed as volume traded was slightly higher than that of the previous sessions in the midst of breadth favoring the bulls on strong selling pressure as revealed by Investdata’s Sentiment Report showing 6% ‘buy’ volume and 94% ‘sell’ position. Total transaction volume index stood at 0.83 points, just as the momentum behind the day’s performance remained relatively strong as Money Flow Index read 59.77points, from the previous day’s 66.08points, an indication that funds left the market.
Despite, the change in market trend, players should keep their gaze on companies with strong earnings power that will support their future prices. Growth and value stocks should be the attraction in the market now, considering the strength of the numbers emanating from those companies and what is happening in the FX market. This is because some companies are net beneficiaries of the Central Bank of Nigeria policy stopping the sale of foreign exchange to Bureaux De Change operators.
To navigate the rest of the quarter and year profitably, order Investdata’s video on How to effectively combine Fundamentals and Technical Analysis to enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, checkout the video materials below.
Index and Market Caps
At the end of Monday’s trading, the composite NGXASI shed 243.49bps, closing at 38,567.26bps, from an opening level of 38,810.75bps, representing a 0.63% decline, just as market capitalization fell by N125.85bn, closing at N20.09tr from its opening value of N20.23tr, also representing a 0.63% depreciation.
Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their buying range has just increased to 24 as they build a new bullish base and positive chart patterns to be on our watchlist. These stocks have double potentials to rally, considering their earnings prospect and the oscillating mood of the market at this time.
To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling and repositioning as we await an economic reform policy to stimulate and re-track the economy to the path of growth and development.
The day’s downturn was driven by depreciation in the prices of high and medium cap stocks like Dangote Cement, Zenith Bank, Flour Mills, Unilever, NPF Microfinance, Wema Bank and Linkage Assurance, among others, which impacted negatively on Year-To-Date loss, increasing it to 4.23%. The loss in market capitalization YTD also inched up to N967.46bn, representing a 4.62% decline from its opening value for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as theNGX Oil/Gas and Consumer goods closed 1.01% and 0.03% higher respectively, while the NGX Industrial Goods Index led the decliners, afterlosing 1.76%, followed by Insurance and Banking with 0.61% and 0.05%respectively.
Market breadth turned positive as gainers outnumbered losers in the ratio of 19:18, while activities in volume and value terms were mixed as players traded 196.95m shares worth N1.02bn, compared to the previous day’s 167.68m units valued at N1.04bn. Volume was boosted by trades in Wema Bank, Ellah Lake, Fidelity Bank, Consolidated Hallmark Insurance and FCMB.
Conoil and NNFM were the best performing stocks for the session, after gaining 9.83% and 9.76%, while closing at N22.35 and N6.75 per share respectively on the strength of the impressive earning and the 15 kobo interim dividend respectively. On the flip side, University Press andLinkage Assurance lost 9.79% and 7.81% respectively, closing at N1.29 and N0.59per share, on profit taking.
Market Outlook
We expect the mixed trend to continue, as portfolio reshuffling and interpretation of the corporate earnings are ongoing ahead of the July inflation data release, as well as the Q2 GDP and results from interim dividend-paying banks. Also, investors are still observing the interplay of forces following recent developments in the FX market with the decision to stop the sale of US$ to BDC operators immediately. The day’s mixed volume suggests that smart money is taking advantage of the oscillating trend and relatively low prices to reposition. It is noteworthy that oil price continues to oscillate in the international market; corporate actions, as well as the interim dividend possibilities around the corner.
We note also that some stocks are trading within their buy ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $68pb to support the global economy and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support global and domestic economic recovery that will enhance the market and give direction.
The banking sector and others remain attractive on the back of the prevailing low prices, despite the mixed half-year earnings.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities ahead of interim dividend announcement. This is especially given that despite the seeming improvements, fixed income yield continues to offer negative real rate of return due to the galloping inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected Q2 earnings reports, until the next MPC meeting in the coming week.
Meanwhile, the home study packs on Comprehensive Stock Market trading course video, INVEST 2021 New Opportunities & New Paths To Profits Summit materials and 10 Golden Stocks for 2021, Strategies and How to invest profitably in this Changing Market Dynamics/ Recession, Mastering Earnings Season For Profitable Investing and Trading in any market situation/ cycles, Life Beyond COVID 19 Investment Opportunities In The Stock Market are now available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08179547605 now.
Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
