Mixed Market Ahead, Amid Portfolio Reshuffling, Sector Rotation, Profit-Taking
Market Update for the Week Ended August 13 and Outlook for August 16-20
Equity transactions on the Nigerian Exchange last week was bullish and interesting, resulting in two consecutive weeks of bull transition in the month of August, thereby extending the positive outing seen in July, as market players remained upbeat on the half-year earnings performance so far submitted by quoted companies, some of which offered interim dividends that send their prices in the northward direction.
Last week’s gain was due to investors and traders repositioning their portfolios on the strength of numbers released to the market so far, which at the same time had triggered sectoral rotation ahead of the results from interim dividend-paying banks and major macroeconomic data. There is also a noticeable buying interest in telecoms stocks, blue-chip, and other medium cap equities that has supported the uptrend within the period under review.
The positive sentiment during the week’s trading reflected that buyers have taken charge as revealed by the candlestick pattern and investdata sentiment report. Also, we note the improved volume action along with bullish technical indicators that supported the ongoing trend in the marketplace. This is just as the weekly money flow index is looking up, an indication that funds entered the market to sustain the positive outing for the second successive week.
Technically, the NGX index action has formed a double bottom chart pattern that supports a continuation of the uptrend, as the index is set to breakout another strong resistance level of 39,834.42 basis points, as trading activities open on Monday, along with the July consumer price index expected to hit the market. A breakout of these levels will confirm a new strong trend in the market.
At the same time, highly capitalised stocks remain a safe haven for players, considering the impressive half-year numbers that emanated from these companies ahead of their Q3 earnings reports expected within the last quarter of the year. Incidentally, that is also the most active quarter of the economy and the market, due to end-of-the-year festivities, among other seasonality.
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Movement Of NGXASI
It was a bullish week with four trading sessions of up markets and one down market. The benchmark index NGXASI started out the period on a negative note, losing 0.63% to halt the previous week Friday’s bull-run, but it reversed up on Tuesday when the index made a strong 1.58% recovery, which was sustained for the rest of the trading week after gaining 0.69%, 0.11%, and 0.08% respectively at midweek, Thursday and Friday. These brought total gains for the week to 1.83%, compared to the previous week’s 0.68% gain.
In all, the key performance index closed 711.59bps up, closing at 39,522.34bps after opening at 38,810.75bps, touching an intra-week high of 39,582.30bps from its lows of 38,544.57bps on positive sentiments and position taking in high, medium, and low cap stocks. Also, market capitalization rose by N371bn, closing at N20.59tr, compared to the previous week’s N20.22tr, which also represented a 1.83% appreciation in value.
The advancers’ table for the week was dominated by medium, low and highly-priced stocks, as investors positioned in telecom stocks like MTNN and Airtel Africa in continuation of portfolio reshuffling in the midst of market rally and changing trading environment. Price actions revealed the presence of buyers in the market, a situation that reflected on the sectorial indexes. Also, during the week, the share price of Seplat Energy was adjusted for an interim dividend of N10.28 recommended by its board of directors.
Market breadth for the period was flat despite the uptrend with high traded volume to signal the presence of smart money and mark-up phases. As losers are equal to gainers in the ratio of 29:29, on a positive sentiment report for the period which 94% buy volume and 6% sell position. Money Flow Index was up, reading 66.47bps from the previous week’s 57.03 points, an indication that funds entered the market.
NSEASI WEEKLY CHART MOVEMENT
From the above, the NGX index action has formed a double bottom chart pattern on a weekly time frame, with the candlestick formation indicating that buyers are still in charge but we need to see a breakout of the black line which is a strong resistance next week as all eyes are on the expected numbers from the interim dividend-paying stocks, after forming a W that supports a continuation of the trend. Also, don’t forget the possibility of profit-taking at this level. Already, the daily chart has confirmed an uptrend with improving volume.
Mixed Sectoral Indices
Performance across sectors was mixed, as the NGX Insurance and Industrial goods shed 2.37% and 1.35% respectively, while the NGX Banking led the advancers after gaining 0.49%, followed by Oil/Gas and Consumer Goods with 0.49% and 0.30% respectively. Transactions in volume and value terms were up, as stockbrokers crossed 1.61bn shares worth N12.59bn, compared to the previous week’s 989.59m units valued at N8.18bn. The week’s volume-driven by trades in Financial Services, Consumer Goods and Natural Resources, particularly Honeywell Flour Mills, BOC Gases, Flourmills, Wema Bank, and Access Bank
Honeywell Flour Mill and NNFM were the best-performing stocks for the week, after gaining 28.13% and 22.76% respectively, closing at N2.05 and N7.55 per share on improved earnings and dividend payout. On the flip side, Juli Pharmacy and Regency Assurance lost 18.02% and 12.50% respectively, at N0.91and N0.42 per share, purely on selloffs and profit-taking.
Outlook for August
We expect a mixed market this week as portfolio reshuffling and sector rotation continued in the midst of expected profit-taking from the recent rally. Considering that the March accounts and half-year interim dividend qualification dates for most companies are within this month. So there will be activities as investors participate in the interim dividend. So, let us keep our eyes on market breadth and direction.
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